Money-saving ideas and tools to set up your new business
If you’ve been following along with this series, you’ve already thought about where to locate your business, the cost of living in your city, where to set up your home office or workplace and how expensive coffee shops are. In this series, how to legally set up your business entity, the business model canvas and lean startup methodologies, DIY and low-cost options to build your website, and how to take advantage of Google Apps for business. (If you missed any of that, check out Saving Money in Your Startup Part 1.)
So you’re thinking about starting a business. Congrats! Now what? Odds are good that if you’re starting a business, you’re a “solopreneur” — meaning it’s just you, and you’ve got some questions about what to do next.
Whether it’s your first startup or you’ve been down this path before, identifying and accessing key resources — both online and offline — will save you money when you launch your business. Today’s post will explore money-saving tools, software, and practices to help you launch your startup in a cost-efficient manner. Ultimately you will have to assess your own business and financial resources to decide what is best for your situation.
So how do you set up a business correctly and get the wheels turning with limited capital and resources?
Outline Your Business Idea
First things first: You need to get a handle on what your business is, and how it will make money. There are a couple of ways to get started.
Traditional business ideology suggests the first step to starting a business is writing a business plan. The old advice was: Write a business plan, find investors, hire a team, go to market, and SELL, SELL, SELL.
Your business plan should include:
- Executive Summary
- Description of Business and Problem Solved
- Marketing Strategy
- Competitive Analysis
- Management Team
Many entrepreneurs write business plans to present to investors in hopes of attracting funding. Business plans also help you get a comprehensive look at the business, market, competition, financial projections, and outline the leadership team that will execute the plan.
“Everyone has a plan ’til they get punched in the mouth.” — Mike Tyson
Business plans are great, but if you’re looking for ways to save money without risking the future success of your business, there are other ways to proceed without investing time or money into a business plan.
Most people struggle with writing a good business plan and consider hiring outside consultants to assist with the process. Do not waste your time paying consultants thousands of dollars to help you with a business plan. If anything, utilize small business resources available through the Small Business Association (SBA) or local colleges.
Because planning for an uncertain future is very difficult, there is a new school of thought emerging in the startup world that’s making its way into the mainstream and being taught in college classrooms across the country: the lean startup.
The lean startup, explains Stanford professor Steve Blank, “favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional ‘big design up front’ development.” The idea comes down to a fast and smart cycle of trial and error: Develop something new, get customer feedback, learn from its failure, and make small, quick improvements as you scale upward.
Research by Harvard Business School shows that 75 percent or more of all venture-backed startups fail. And these businesses fail because they run out of money.
The Lean Startup method can actually make your new business more likely to succeed by keeping expenses low — giving you a longer period of time to increase revenue enough to begin turning a profit.
If you’re still trying to figure out what your business looks like, check out a resource like Blank’s “Startup Owner’s Manual” — or “The Lean Startup,” by Blank’s former student, Eric Ries — or an online version of the business model canvas. This can help you get an initial framework for the impact areas of your business and help you save money by focusing on priorities.
Setting up Your Entity
While running out to set up a new business entity isn’t the first thing to do on your startup checklist, it shouldn’t be too far down the line. Once you have an understanding of your business idea, costs, revenue streams, customer segments, key activities and partnerships, and path to execution, setting up your business and making it official is the logical next step.
Below are two options for setting up your business.
Option 1: LegalZoom
With so many services moving online these days, it’s no surprise that there are now legal services available, too. The most reputable and trusted online resource for lawyers and legal documents is LegalZoom. LegalZoom bills itself as the nation’s leading provider of personalized, online legal solutions for small business owners and families. They were founded in 2001 and boast having helped start over one million businesses.
LegalZoom provides online legal documents and allows you to set up an LLC or incorporate and set up an S-Corp or C-Corp for $149 + state filing fees. That’s less than most lawyers charge for just an hour of services.
When setting up your business, LegalZoom is a better fit if you already know what type of entity you want to set up for your business. In the event you are not sure what type of entity makes the most sense for your business, LegalZoom takes you through a step-by-step process with questionnaires to be sure you are setting up the right type of entity to meet your needs. They also guarantee your satisfaction with their services.
Advantages of LegalZoom
- Ability to browse and review costs of documents ahead of time
- $149 + state fees to set up your business
- Lots of free online resources available as well as FAQs
- Step-by-step guides and questionnaires to assist in decision making
- Will check availability of the business name for you with your state
- Quick turnaround
- 24/7 access to information
Disadvantages of Legalzoom
- Risk of filing the wrong paperwork or setting up the wrong type of entity (i.e., bad business decisions)
- LegalZoom’s guarantee only covers satisfaction issues caused by LegalZoom — not changes to your situation or your state of mind
- Inability to seamlessly ask a lawyer questions as they come up
- You don’t get to tell your story in person, which could uncover other legal needs or strategies
- No hands-on professional there by your side
Option 2: Traditional Law Firm
Knowing a good lawyer is like knowing a good mechanic. They are worth their weight in gold, but most people hope to rarely need their services.
Growing up in a family of attorneys, I took for granted having access to lawyers. But because the nuances of the law are very foreign to most people, using a law firm, while more costly, might be the right option for setting up your business. That said, I’ve opened bills from law firms and had my jaw drop at the billable hours I was charged for.
Advantages of a Law Firm
- Peace of mind knowing you are working with a local, trusted professional
- The ability to have a lawyer answer all of your questions
- A lawyer may recommend other ideas that you hadn’t thought of
- You can find a lawyer that specializes in unique circumstances or situations
- Years of experience
Disadvantages a Law Firm
- COST: Most lawyers charge $150/hr+ and will bill by the hour
- Billable hours: Lawyers charge for email, phone calls, and face-to-face meetings
- Scheduling: Making appointments and getting on the lawyer’s calendar can be tough
LegalZoom can provide instant access to documents, helping you get the set-up process started right away. Understanding what type of entity you want to set up is important. LegalZoom has lots of online resources and guides to follow, but if you are still unclear or uncertain, it’s a smart idea to schedule a meeting with a lawyer. If you feel LegalZoom will suffice, you can save yourself a thousand dollars or more in setting up your business.
Another option is to use LegalZoom and then set up a one-hour meeting with a lawyer to review your documents to be sure everything is set up correctly as you intended it to be. This can cost you a couple hundred dollars for an hour or two of the lawyer’s time, versus a thousand dollars or more to have the lawyer create the documents for you.
Once your business structure is set up, you will want to look at building out the business’s infrastructure in a cost-efficient but effective manner.
Manage Your Business with Google Apps
Google Apps is the only service I’ve used that I would recommend for managing your business email, file sharing, calendars, video meetings, and internal chat. It saves all your information in the cloud, across devices, and makes files and folders easy to share across teams from anywhere.
And it can be set up in just minutes, so you’ll be up and running in no time.
Your Google Apps account will allow you to get custom email addresses for you and your team. This is a very simple and affordable branding and credibility move you should make early on.
Remember when some businesses didn’t have a website and you started to wonder if they were legit or not? The same can be said for a email@example.com email address.
If you have a Yahoo or Gmail email address, make the simple move to get a custom Google Apps email address for your business, even if you’re the only one working there. You can forward all of your emails to one account, but the ability to switch between email accounts within Google is pretty seamless (once logged in, Google Apps lets you select from a drop-down menu to switch between accounts).
Google Apps was free for a while, then started to charge $5 per user per month, and now offers a $10 per user per month plan for additional storage and features. While I generally shy away from monthly subscriptions, especially unnecessary ones, Google Apps is a good investment and the return on time, convenience, ease of use, and money invested is second to none in this space. I personally have not tried the $10/month option yet, and get all the business services and storage space we need from the $5/month package.
The calendar and Google Drive allow you to share where you’ll be and what you’re working on with your team. Google Drive offers you a suite of word processing documents, spreadsheets, and folders that you can seamlessly use, store in the cloud, and share with your team.
Whatever industry you’re in, your business is going to need a website. If you’re looking for an affordable way to get a professional-looking website, there are a few different services for the do-it-yourselfer. Learning to build a basic website may be a good investment of your time.
If you don’t want to learn to build your own site, you can look to sites like Odesk and Elance, where you can outsource the work for a reasonable price, or find a friend or family member who is willing to do it. Odds are good that someone you know can build you version 1.0 of your website for an affordable price.
Assuming you want to DIY, below are some code-free options for building your website.
There are two different WordPress sites, WordPress.com and WordPress.org. Beginners should stick with WordPress.com, which allows you to host your site on WordPress’s servers (one less thing for you to worry about). Sticking with the dot-com version, you will want to upgrade to a custom domain name — otherwise you will have dot-wordpress in your URL (e.g., www.yourwebsite.wordpress.com). Note that you must initially start with a dot-wordpress URL, and then you can upgrade.
You can register a domain name with WordPress.com for $18, or map a domain you already own for $13. WordPress is easy to use and is the site I primarily use for building websites.
Here are some advantages and disadvantages I’ve found with WordPress.com (note that these are not the same for the more powerful wordpress.org, which is what I have shifted my sites over to):
Advantages of WordPress.com
- Quick setup: You can have a site up and running in less than 30 minutes
- Free hosting thru WordPress
- Cost effective
- No monthly hosting or website expenses
- Ability to build and customize a site without coding
- Lots of easy-to-use, free templates
- Plug-ins to add additional features
- Easy click-and-drag integration with Facebook, Twitter, and other social media sites
Disadvantages of WordPress.com
- Lack of ability to customize and move things on the screen
- Less unique and visually compelling than using a graphic designer
- Requires additional set up for an e-commerce site
- I’ve found that the best templates usually charge a one-time fee
One of the most hyped new website builder services is Squarespace. One look at their site and you can see how good looking these websites are. Squarespace powers nearly 2 million websites and has gotten rave reviews for its visually appealing and e-commerce enabled sites.
Advantages of Squarespace
- Lots of style and design options
- Fully integrated e-commerce – allows you to sell things online
- Quick and easy setup (again, no coding!)
- Responsive templates that optimize viewing on mobile devices
Disadvantages of Squarespace
- Cost: $8-$24/month (beware of locking your business into ongoing subscriptions)
Technology is a place where you can sink a lot of your business’s money. There were times in the past when spending thousands of dollars on a website might have made sense. With WordPress.com and Squarespace there is no reason for you to spend that kind of cash to set up your website. Spend a couple of minutes on each site and choose the one that works for you and your business.
The cost of a WordPress site is going to be cheaper annually, but if you need a turn-key e-commerce business website, Squarespace might be a better fit.
It’s important to assess ongoing costs to your business and to keep overhead when low getting started. Most businesses fail because they run out of revenue, so try to keep expenses low while you start to ramp up revenue (we will cover this in another post).
There are always new technologies, innovations, and services coming out, so having someone on your team who can identify value and opportunities in these areas is important. We will get to hiring in a later post, but for now, these suggestions should help get you up and running or shed light on valuable services for your small business.
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This post was originally posted at The Simple Dollar.