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1. Use free tools for as long as possible.
We used free solutions for as many business problems as we could until it no longer made sense. One of our favorite stories to look back on is how we processed payments. When we first started our business, we used Venmo to pay our hosts. In the process, we had four personal accounts shut down due to using them for business purposes. It wasn’t pretty, but it worked to get us off the ground.
2. Don’t build custom software early.
This tip directly applies to software companies. Chances are, while your idea is unique, a lot of the software can be borrowed or mimicked from a bigger player in the space while you test your idea. For example, at the inception of Neighbor, we used simple landing pages and PDFs to obtain our first paying customers. Shortly thereafter, we purchased an Airbnb clone website from some developers in India and adapted it to our self-storage business model. It was cheap but worked and helped us validate our idea before we created our own custom platform. You can waste a lot of time and money on engineering if you don’t validate your idea first. We raised our seed round on this $600 MVP.
3. Always ask for a discount.
There is no shame in trying to get the best price for a good or service. Whatever you’re purchasing, whether it’s software, furniture or office space, always ask, “Is this the best price you can do?” By asking for discounts when we signed up for our HR software, we were able to get six months free and 40% off afterward. This saved us a significant amount of money in the early days of our business.
4. Look for tech solutions.
On a similar note as the free tools, look for tech solutions to different business problems. Chances are, a startup out there has a product that’s cheaper and better than the big brands on the market. For example, we found a startup that had amazing dental coverage and included cool incentives like electric toothbrushes and frequent brusher discounts. We still use them today.
5. Use marketplaces for travel.
Airbnb and Turo can save you money. Going to conferences and traveling to visit investors is an important part of growing your startup, but it can be expensive. Choosing to stay in an Airbnb or renting a car through Turo can be much more affordable than a hotel or a traditional car rental service. We’ve even shared rooms when our managing team travels. Some of our best conversations and bonding happened in a cramped Airbnb.
6. Use portfolio companies.
If you receive funding from a traditional venture capital firm, you now have access to all their portfolio companies. You will generally be able to sign up for their services at a steep discount and get intros to their executives and staff.
7. Share an office with investors.
Sharing an office has a few benefits. First, you save on rent while you have a small team. Second, you create a better relationship with your investors. Finally, you get to see how other companies are doing and learn from their success. Don’t hesitate to ask your investor during your seed round. They want to see you get off the ground and will be happy to help — but don’t overstay your welcome.
8. Seek perks from big companies.
Most big companies have programs to help startups get off the ground. We were able to snag Amazon Web Services and Google Cloud startup credits as well as banking benefits. If you have investors, ask them about their connections.
9. Test marketing before spending.
This is a simple tip but one that will save you money in the long run. Too often, after you get a little funding, the urge to pour it into a Google or Facebook ad campaign can distract you from testing your marketing first. Run a few small campaigns and ensure that your targeting and keywords look solid before increasing the spend.
10. Apply for grants.
This isn’t a way to save money as much as it is a way to get more money in a unique way. Universities, state and city governments and even private companies will often have grants and competitions available through which you can win small amounts of cash, from $10,000 to $100,000. After your first two years, this amount of money is minimal, but when you’re just getting started, that much money can completely ramp up your marketing or other operational costs. After winning a state-funded grant, we established a relationship with our state government that was as important as the money.
These frugal, bootstrap habits have continued to be a part of our core identity as a company even though we’ve received venture funding. We always test, look for good tech solutions and save money where we can. What suggestions would you add to this list to save money as a startup?
July 9, 2019 at 09:04AM
Forbes – Entrepreneurs