28 Jun How to Manage your Startup with Limited Resources
There are some pretty stark statistics surrounding the number of new businesses that fail. A much-used quote is that 95% of businesses fail within the first 5 years. More recent studies suggest that the actual number is closer to 50%, while about a third of businesses reach their 10-year anniversary. Whatever the amount, it’s pretty clear that starting a new business is a challenge. While these numbers are daunting, it’s more important to understand the reasons why they fail rather than just focusing on the numbers.
Access to funds is one of the most common reasons startups fail. Increasingly, entrepreneurs are putting their own cash on the line because traditional lending sources like banks are very reluctant to give SMEs any funding currently. This is the bootstrapped startup’s dilemma.
If this sounds like your business model, don’t fear! All hope is not lost. Here’s how you can make things happen on a tight budget for you and your company.
Getting up and running is the most critical phase for a new business. It’s tempting to make a big splash when you launch your company. Ask yourself how much effect an expensive, flashy launch will really have on your business in the long run.
When you’re just getting started, it’s crucial to keep costs as low as possible. You can’t run the show by yourself, so it’s tempting to bring on multiple team members to support you. But at this early stage, paying out for monthly wages is a huge burden on a young business. There are lots of fellow SMEs offering great services at a fraction of the cost of hiring full-time staff. Whatever you can’t do yourself, look at outsourcing.
It’s also important to reduce personal expenses. Don’t shell out on big salaries at the get go. Reduce all personal expenses so you can direct 100% of your resources toward growing your startup. At the beginning, can you work from home or a co-working space? The longer you can avoid a large overhead like rent the better for your bottom line.
Getting seen and heard
New players typically struggle to garner media attention. It’s unlikely you have the budget to hire a public-relations specialist. And you might not have the cash to outsource your PR needs to an agency. Here’s the really frustrating part: You know that without any attention for your stellar product or service, the early going will be slow.
The solution? Become a contributor.
While you work to get feature treatment from top-of-market publications, very little stops you from becoming a contributing expert to these same information sources. Most major publications will happily accept contributed content if you add value. It’s typical for each post or article to run with a small photo and brief bio that links to your startup’s home page. Contributing regularly also enhances your brand value.
Slow and steady scaling
Of all the factors that contribute to startup failure, research shows premature scaling is a major culprit. When you’re running your startup on a budget, you’re under constant pressure. That stress increases if you’re seeking funding. Don’t overstretch yourself from the get-go.
Slow and steady wins the raise. Carefully analyse each section of your business. Which area is the most profitable? Which sections eat your time for little or no return? Analyse which areas are going well and focus on these. As you and your business grows, there is potential for scaling.
Find yourself a co-founder
Two heads (and two bank accounts) are better than one. Bringing on a co-founder is one of the most effective yet underestimated ways to bootstrap your startup.
New companies with two co-founders are more likely to succeed. They raise 30% more money than startups with a single founder, and they experience three times the user growth. A co-founder who shares your dream and is willing to put in the effort can be your company’s greatest asset.
The most important thing to remember is that your focus must be on revenue-generating activities. No matter how brilliant your startup or how grand your long-term strategy, you’re poised to fail if you can’t sustain your business with cash in the early stage. The most important thing you can do now is to generate revenue and profit to put back into your company. If you’re hoping to attract backing from investors down the road, you’ll find it much easier to secure the deal if you’re able to show your business is a profitable one.