The following is a guest post from Avery Bale and Jake Welford. You can contact them through Twitter @averybale and @jakecutz or via email: jakewelford [at] gmail [dot] com and averybale [at] gmail [dot] com.
Economies around the world are suffering from financial difficulties, affecting businesses who are earning less, consumers who are spending less, and governments who are collecting less in tax revenues. What’s the net result for current businesspeople and for those with aspirations for starting up their own business?
Well, it is too difficult to cast judgement on the global economy, even within national boundaries there are industries that are growing and prospering, but then, there are other businesses and industries which are undoubtedly struggling.
How do you start up in this kind of tumultuous market?
If you are already in business you might want to skip this section, for those interested in starting up,.. read on.
Having the get-up-and-go to start a company in the first place is an achievement in itself. So it’s not easy to start up any climate. Question- does your idea need lots of capital? First thing is first, if you require lots of money upfront, you need to plan. This is especially important if the sums of money are great in relation to your net assets. The more (financially) you are risking, the more you should plan.
There are several ways to grow and finance your business in a tough market.
Some tips on saving money on common costs:
– Work from home – not all businesses require premises- can you wait until you are profitable for premises?
– Employ interns to do things you can’t/haven’t got time to do
– Minimise costs of advertising by utilising digital/social media
– Is outsourcing an option for any element of your business?
– Save money by avoiding acting like you’ve ‘made it’- keep track of your expenses and review them regularly. If spending isn’t necessary and doesn’t result in (direct or indirect)profit, cut it out.
Some tips on growing
– Can you get a bank loan to grow? (think this through and plan to see if you really need to take on debt)
– Can you use an injection of cash from an investor (useful if you have big orders that you cannot fulfil or you require expertise/contacts from a seasoned veteran)
– Can you ask friends/family/others (proceed with caution!) for growth capital.
– Can you offer shares to service providers or people that go the extra mile for your business. This might be a good option to save on potentially fatal costs in the start up phase- you can always buy back shares later on.
– Instead of trading with money can you trade with services? This can be a very good way of leveraging your skills and experience (or that of your staff) for more expensive services that you could not afford. Example- if you can do printing cheaply but need a coder, offering them some printing for free, and getting their coding expertise for the price of your printing would be more beneficial than trading with money.
Short term injections of cash
Something that can work, if you are sure that you can get a return on the money you borrow, is to use loans or credit cards. Loans can be an option longer term, and mean that you are not at risk of giving away part or all of your business (which can happen if you get an investor involved). Many large businesses borrow vast sum of money via long term loans and pay them back with cashflow from the services/products they sell.
The other option is to use what can effectively be one way of getting interest free growth capital. I would warn the reader that one has to be very aware of their cash flow and completely on top of where they are going when considering using this form of finance. I’m talking about leveraging by using the best credit cards. The main reasons to use credit cards are they are fast (if you have a good credit rating) way of obtaining finance, there’s no risk to your ownership of the business (just don’t pay late) and if you compare rates properly you can get the money interest free. To get the best rates on credit cards it is wise to look around for the best credit card rates.
What should you do?
When it comes to the crunch you, as the owner of your business, have to make the tough decisions. Don’t let anyone make those choices for you, weight up the choices and make your decision. All of the options I’ve mentioned have plusses and minuses. There will be other options too, I have just covered, briefly, some of the options available.
The writer wishes you all the best and that you achieve your business goals in this tough time.
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