It’s vital to avoid overspending in the crucial start-up phase of your business. Keeping certain rules in mind can help you avoid this.

Far too many viable businesses fail for a very simple and predictable reason – they run out of cash. In those vital, pre-revenue months when you’re developing your offering, finding your first customers and (possibly) hunting for seed capital investors, it’s easy to take your eye off rising costs. But doing so would be a fatal mistake.


Unless you keep a careful eye on cost to avoid running through your precious start-up cash, and install a culture of careful cost-management, even a great start-up idea can die on the vine. Fortunately, three simple rules can make a big impact on the early bottom line.


Avoid Commitment

Even if your business plan has been well thought through, you’re unlikely to really know all your requirements from day one. It’s easy to find yourself overpaying for office space that you won’t fill, for example, or finding yourself trapped in a premises that you quickly learn is too small for your needs.


To avoid the difficulty and expense this creates, look for flexible terms with every product or service you use, from telecoms to legal fees. This is particularly true when it comes to premises: when you decide that the business is ready to move out from your home office and into the real world, look to find a business centre or shared space with flexible leasing terms. This will save you being on the hook for a year’s rent or more if things don’t pan out as you hoped.


Negotiate and Barter

Of course, in return for offering flexible terms, your suppliers will expect a better return. This is natural, but don’t be afraid to negotiate. The past few years have made everyone appreciate the value of new business, and many people have started up their own small businesses after redundancies, making the market in most sectors highly competitive. Talk to multiple suppliers, and make it clear to those suppliers that they’re not the only company you’re considering.


Another option to contain costs is to pay – in part or full – in trade. Presumably, you offer something that your supplier wants, so don’t hesitate to propose this idea to them. So long as both sides apply the same professionalism to each other as they do to contracts that pay direct cash, this kind of bartering arrangement can be hugely beneficial.


Hire Ambition

Most of all, you need your first hires to justify their outlay quickly: a salary for someone who’s not delivering can become a real dead weight on the business. Giving a qualified but less experienced person a chance with more responsibility than they have had before can be cost effective and beneficial to both parties.


If you are adopting this riskier recruitment strategy, it’s wise to have more flexible arrangements for your staff, with six month probationary periods at a minimum. We’d even recommend taking people on short term contracts with the understanding that, if things work out, there is a permanent job to be had. That will attract the right kind of candidate – someone who wants to hit the ground running and make the business thrive.


There’s no guarantee of success, and it is a tough environment out there for all start-ups. But keeping a close eye on your expenses from the outset will give you every opportunity for survival.


At DCA, we advise many start-ups in their crucial first few months of life. We’d be happy to sit down and talk about your business, so just contact us to set up an initial meeting.