Keeping expenses down is a challenge when you’re launching a new business. Everyone wants to sell you something they deem as essential. Thing is, plenty of those “essential” items can be a huge waste of your tight budget, whereas others turn out to be a life saver. So where do you scrimp and where do you splurge?
Here’s some advice from entrepreneurs who’ve been there:
1. DON’T invest in custom-made tools
Why: They are cost-intensive and almost impossible to resell. Erynn Mayes, co-owner of Kanga Australian Meat Pies in Toronto, says the worst thing she spent money on was a custom-made single pie press. “By the time the press arrived, we had outgrown its capacity and ended up moving to a five-head press. You can't return something custom made. Think big!” she advised.
2. DO invest in quality where it serves
Why: When Grant Cavicchi started his Halifax-based gourmet sausage company, Cavicchi’s Meats in 2008, he had to borrow extra money to have in a large walk-in fridge and freezer built. “We could have kept using smaller equipment, but we were looking ahead to what we’d need if things took off, and it was one of the best decisions we made. It took us above budget, but we bit the bullet and it is still serving us well now,” he said.
3. DON’T invest in new computers
Why: If the system you’re using is functioning just fine, resist the urge to upgrade as it is an unworthy splurge for a new business and depreciates immediately. You’re best off spending the cash on something more urgent.
4. DO Invest in software that works
Why: When Judith Virag was setting up her Calgary business, Harding’s Cleaning, she had nightmares about missing appointments with customers. “I knew an Excel spreadsheet wasn’t going to cut it,” she said. “I invested in a scheduling program that pushes all the information for the crew to a smartphone.”
Same applies to inventory tracking software and other types that free up more of your precious time.
5. DON’T rent costly office/retail/manufacturing space
Why: If you’re doing great running the business from your home or somewhere reasonably priced, keep on trucking until you actually need to move to keep expenditure down. Sure, a fancier space would be nice, but if you don’t need it, stay put.
6. DO get the right legal advice
Why: Especially important if you’re in a partnership or dealing with things such as patents, having legal agreements in place will save you heartache and costs further down the road should anything go wrong. Do you research, find an experienced resource. Nobody likes paying lawyer’s fees, but often with legal stuff it’s a case of pay now, or pay more later.
This article was originally published January 21, 2015.