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5 Finance Tips for Shoestring Entrepreneurs

Start-ups are always risky, but that risk increases if you are a working on a tight budget. It isn’t impossible for a shoestring start-up to success, but you’ll need to be careful and even more diligent than other entrepreneurs.

Here are some tips to help you on your way:

Be Prepared

Do your utmost to ensure that you have as many resources as possible if you are planning to start a business. This tip might seem strange if you are on a tight budget and are already encountering difficulties with finding sufficient financing, but it is an important point that deserves to be hammered over and over until it sinks in. Starting a business creates a serious drain on your resources. You will inevitably encounter surprises that you did not plan for and when you do, you’ll want as much financial padding as possible to absorb the force of the impact from your fall to make sure you can get back up again. So, be prepared to sacrifice. Dig deep into your own resources, be prepared to cut down on your living standards, take the time to save up beforehand, and approach your friends and family for assistance.

Consider Alternatives

Go through the list of expenses that you’ll be paying for your start-up and see if there are cheaper alternatives that won’t also damage your effectiveness. For example, if you are planning to start an IT firm, you don’t actually need a physical office so long as you are willing to adopt cloud computing and let your employees work from home. Similarly, consider performing certain business functions such as your accounting personally instead of contracting them to outsiders.

Don’t Over Commit

Do your research to find out if there is demand in the market for your product and how much of that demand you can expect to tap into. You don’t want to spend your limited resources on a venture only to find out that the returns won’t justify the initial investment. Similarly, you do not want to waste your resources on making everything perfect and to your taste. Put your focus on making real steps towards earning revenue as soon as possible because you cannot afford a prolonged build-up period.

Find Partners

Capital is often preferable to debt as a source of financing because capital tends to be cheaper. Even if you need to hand over a share in the control and profits of your start-up, finding partners to help out can be worthwhile. Not only can your partners contribute money, equipment, and experience to the success of your start-up, but they’ll also bear some of the burden in case your start-up fails.

Understand the Fundamentals

As an entrepreneur on a tight budget, you absolutely cannot afford mistakes because you have so little room to maneuver that each one will come as a body blow. Make sure that you have a thorough understanding of your financial statements and a good grasp of the language of business. Failure to accomplish these aims means that you cannot easily put together a comprehensive picture of your start-up’s performance, causing you to lose on valuable analytical tools. Having access to and being able to read up-to-date accounting helps you understand your start-up’s position, its current strengths and weaknesses, and what must be done to either bolster or correct those qualities.

Peter Coppola is a personal finance consultant. He is always looking at ways to save his clients money. His articles mainly appear on personal finance blogs. . Click here for more personal finance information.

This was posted in Bdaily's Members' News section by Steve Gott .