Too often people who want to start a startup or any kind of small business do a major mistake from the beginning. They try to play big hoping that this will make their business big.
What do I mean? You probably have friends who have gone this route. They want to start a small consulting company and rent an office, buy expensive furniture, cars, hire people and pay a top designer for company logo.
Photo by fugm10 at Flickr
Spending big is not going to make you big
The only use of starting with so much expenses is to force yourself to work harder because you need to pay the bills and salaries every month. This is to some extend a positive thing but it’s not worth it. There are plenty of cheaper ways to motivate yourself. And the truth is people don’t do this because they are seeking for motivation.
They just believe that starting with an office and staff will automatically make their business big enough to cover the expenses and bring profits. In most cases it won’t happen. Having employees or shiny office is unlikely to help you get more business except maybe in some niches like advertising.
When starting a business this way you are turning yourself into a slave from the beginning. Running a business that started with expenses is not better than being a desperate employee who can’t refuse his boss’ orders because he has a family to feed. This is exactly what most people are running away from – being a slave for your bills. When you start big, you are forced to get more work so you can pay the bills – this decreases your ability to choose clients and in most cases you just take every order that comes to you. How is this different than having a boss?
Why don’t you try natural grow?
Instead of playing it big, why don’t you start like a teenager? Imagine you don’t have any money or just have few hundred bucks. Imagine you can’t get any loan. What are you going to do? Give up? Did all those guys in garages gave up or did they create Microsoft and Google?
When I was starting a software services business, I had no office (and I still don’t have one), no employees and not even a company. Even the provider’s fee for Guru.com was looking too high for me so I started with free account. This frugal start allowed me build a business slowly but freely with the time – without worrying about making more money than I needed to live. This freedom allowed me work on my own products and sites building income generators instead of being forced to work on customer projects all the time. This is exactly what was going to happen if I started big – I would have too much bills to pay and wouldn’t be able to trade current income for passive income in the future.
If you start your business small and follow the natural grow you will always have more freedom to choose its future directions.
Hire employers when you need them, instead of first hiring employees and then searching work for them with the hope to grow this way. Growth must come as a response to the need to execute more coming orders or realize new projects rather than to be a target by itself.
Rent office after you need it – not before that. There are conference rooms and virtual offices that can do the work before you reach the moment. How will know when you have reached it? When the bills to rent conference rooms exceed the fees you would pay for having an office, only then you really need to own one.
When do you need a dedicated server? When the costs to host your sites on a shared server are higher than the cost of owning a dedicated server.
When does your business need machines? When the monthly expenses to get your production outsourced or to rent machines start exceeding the expenses of owning the machines yourself.
Keep asking questions like this and you’ll figure out how to grow naturally. Sure, sometimes you may lose few bucks and some time due to the fact you didn’t started with the optimal infrastructure from the beginning, but that’s much better than turning to a slave of your business bills because you try to cover every possible need.