If you plan to open a home-based business instead of an office-based business, one thing is apparent: you are not really swimming in cash. Most entrepreneurs start out with a minimum capital and this is one of the reasons why so many small businesses fail. In truth, it is possible to run a business on a bootstrap budget. You just have to be smart about deciding when and how much it is worth spending.
The best part about being a sole proprietor is that you make all the decisions and you get all the profits. The worst part is that you are responsible for bad decisions and you bear the losses. And this is why you need all the help you can get to become savvy about putting your money to work and managing on a micro-budget.
As you may have noticed from our blog, we are here to support new entrepreneurs and home-based business owners with helpful tips and advice for running their businesses and growing them into successful companies. Today we shall discuss the topic of how to manage a small capital by applying smart bootstrapping principles.
1. DIY What You Can
Do it yourself is the principle which built the entrepreneurial spirit and created America – the land of opportunities for anyone willing to work hard and with dedication. The DIY spirit is present in every aspect of our lives, from painting the house to doing our taxes. As a home-based business owner, it is a critical skill to have: the ability to learn to fulfill several roles, from marketer to salesperson, to secretary. Some of these skills may already be second nature to you from the jobs you used to have. For others, you need to have the patience and diligence to learn them, because outsourcing is not an option for you yet.
2. However, Ask the Experts When Needed
There are certain areas where you will need specialized advice. Some of the most important are tax and legal advice. You cannot afford to guess and make a mistake – it may be a very costly mistake for your business and your entire family’s finances. When you decide what form of incorporation to select for your home business or try to decide whether a specific expense is tax deductible or not, you’d better consult a certified practitioner.
3. Plan for Your Future Salary
Have you decided how you will remunerate yourself once your home-based business starts generating money? Do you simply take all the money left after expenses and taxes? Sure, you could do that. But it is smarter to set a salary for yourself, because this amount is also tax deductible. Why pay more taxes than you need to? Plus, as an employee of your home-based business you may qualify for unemployment benefits should your business fail (but you need to consult with an attorney specializing in labor law).
4. Use Bartering at Any Opportunity
Bartering is a wonderfully simple and effective way in which small businesses help each other without exchanging money. Thus, if you can do something useful to promote or help a business which is not a direct competitor, that business will do something similar for you. A few simple bartering ideas are: banner exchanges on each other’s website, a discount on the other company’s product for a purchase made on your website, and so on.
5. Reduce Your Personal Expenses
After launching your home-based business it is certainly not the right moment to start an expensive hobby, or buy a new home cinema system or designer clothes. In other words, you should watch your personal expenses and even analyze and see what you can dispense with. This early sacrifice will be repaid once your business starts generating profits. You will then be able to indulge in your hobbies without jeopardizing the finances of your business or family.