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Save Money in a Home Business Start-Up

When Times are Hard, Keep Your Start-Up Costs Under Control

72By Nora Caley

If you are starting a new home-based business, you can keep costs under control from the very beginning. The key is to plan ahead, and shop around.

Plan Wisely

First, estimate how much it will cost to start your business. Create a spreadsheet that lists your probable expenditures. You can use Microsoft Excel, which comes in the Microsoft Office suite of software products. There are also open-source, or free, programs such as OpenOffice.org Calc, Google Docs, and other online spreadsheets.

Make a list of your start-up expenditures. Start with office equipment such as the computer, fax machine, telephone, printer, and software. Don’t forget to include the cost of learning how to use certain software, or the cost of having a technology professional set up the computer.

If you’re in catering or another food-related business, input the cost of the mixer, utensils, oven, and other equipment. You might need to buy a larger washing machine, a new sewing machine, landscaping equipment, or other items.

You might need furniture, such as a desk, tables to assemble your products, file cabinets for your sales and other paper records, and shelves. Are you going to have people come to your home, such as for daycare? Check with your state and local government regulatory agency for rules about square footage, how much fencing you need around your yard, and other details that will add to your costs.

If you are making a product, include an entry for your raw materials. That could be fabric, food ingredients, or even paper. There’s also packaging.

Don’t forget miscellaneous items such as cleaning supplies, printer cartridges, and books that describe how to write a business plan. If you have people coming to your home, do you have to take a class in first aid?

Another category is transportation. How will you ship your products, or will you be delivering them to customers? Are you providing a service for people at their homes or offices? Do you have to pick up your raw materials?

There’s also insurance. If you have people coming into your home, you will need liability insurance to cover you if a customer or employee is injured.

You might want to buy disability insurance, if you are self-employed and you will be income-less if you become too sick or injured to work. Disability insurance payments can cover about half of your monthly income. Make sure you have enough auto insurance to cover those extra miles of client visits.

Your homeowners’ policy might not cover your business equipment if your home is damaged by fire, theft, or weather. Also, the policy might not pay for an employee becoming injured while working in your home. Check with your insurance agent to see what your policy does cover. If you are renting, find out what your renters’ insurance covers.

If you are going to accept credit cards, you’ll have to sign up with a merchant services department at a bank, which will charge you to make credit card transactions. You might have to buy permits, hire an accountant, and spend more money on utilities.

Also you will have to market your business. That could mean anything from building a web site to printing business cards to running ads in your community newspaper.

Cut Costs

After you total your list of start-up purchases, consider which items are not necessary. For example, it might be nice to leave the house occasionally and take the laptop to a coffee bar, but laptops and lattes are expensive. Maybe you could put off those purchases for a while. Is your TV ad really doable, or should you stick with a print ad in your local community newspaper? Do you need to fly to every trade show, or should you limit your travel?

Your business phone should be separate from your home line. Do some research to see if it would be cheaper to use a cell phone for the business line or to add a land line for business. Be sure to include the cost of voice messaging.

For equipment and other purchases, buy used. Check your local newspaper for businesses that have shuttered and are selling furniture at auction. You might find mixing bowls and measuring cups at a restaurant sale.
Visit Craigslist and eBay for used equipment and other items. On eBay, you can check if the seller has had positive feedback regarding other sales. Also try yard sales and flea markets, where you can pick up simple things like tables or shelves.

Market Inexpensively

There are many ways to do low cost marketing. Instead of spending money on advertisements, try word of mouth marketing. Talk to your friends and acquaintances about your new business. Bring a small stack of business cards with you when you attend events, and be sure to network. If your business is food, drop off some coupons and menus, or free samples, at area businesses. If your business is health-related, see if you can leave a stack of brochures at nearby yoga studios. Put fliers up at bulletin boards at coffee shops, community centers, and other facilities.

You can open a free email account through Google, Yahoo, and other web sites. Be sure to choose an email name that sounds professional. Send occasional emails to current customers, if they say it’s okay.

Make Other Smart Purchases

Buy cleaning supplies, office supplies, and other items in bulk at warehouse stores. Don’t make impulse purchases while you’re there.

When you shop for insurance, contact your industry association, chamber of commerce, or other affiliated group to get information about discounts. Shop around. You might be able to get better rates based on how high a deductible you’re willing to pay. With disability insurance, the monthly premiums will vary according to the coverage you buy, how long a waiting period you have (which means how long between when you are injured and when you start receiving payments), and how long the coverage lasts (from a few months to life).

The same goes for business credit cards and a business checking account. Shop around for the best rates.

You can get free advice from SCORE, the SBA program of volunteer counselors, and also from your local Small Business Development Center. Instead of hiring a technology expert to set up your computer, take a class, research online, or get some library books to help you learn how to do this yourself. Ask your friends what kind of software they use for certain tasks, and ask them how user-friendly these products are. Instead of hiring an accountant to watch your every financial move, try using tax or financial planning software such as Quicken. Try to limit the times you need to call a lawyer. Put off hiring an employee until you’re sure your business is earning enough money to pay for wages and workers compensation insurance.

Finally, there are some places where you should not try to save money. You don’t want to buy substandard raw materials, or switch to ingredients that don’t taste as good as the more expensive version. If you don’t want to buy disability insurance, at least have a solid savings account that has enough money to pay for your day-to-day expenditures for months, should you stop earning money for any reason. HBM

Nora Caley is a freelance writer based in Denver. She specializes in business articles.

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