Tips to start a cost-effective startup

by Leon Cullens 22. april 2012 02:49

Two years ago I started my first company, called Tweakplanet, a simple company that provides software development services to customers. This taught me a lot of things, but mostly how to work cost-effectively. Here are some great tips for anyone who wants to start her own business.

Start with zero budget

Starting without money is probably the best thing to do. At least, it was for me. I see lots of people spending money they don't even have, hoping to recoup it later. Sure, that's the entrepreneurial spirit, and sometimes it's necessary, but most of the time people are trying to do everything 'too well' right from the start. It's nice to start with a large office, your own accountant and a large marketing budget, but it's not necessarily going to make your company more successful. I started without all that, focussed entirely on the business and learned on the job. This way I was 100% guaranteed that I wouldn't make any losses, only profit. It also removed a lot of distractions, leading to a higher productivity.

Work from home

Simple enough: don't rent an office, just work from home as long as you can. Make sure to find a room without too many disturbances (wifes, children, television, etc.), and work from there. Meet your clients in public places, cafes, their own offices, etc. It works fine for me, it works fine for many others, and it can save you a lot of money (and time, because you don't have to travel to work).

Learn to do your own administration

Don't give all your bills to your accountant to let her do all the work, but learn to do it yourself. Not only does it save you a lot of money, it will also give you a lot more knowledge about your own financials and will probably lead to better investments (when should I buy that new computer? Should I wait till next year? Can I deduct that investment from taxes?).

Free alternatives

I explained it before, but it's a very important point so I'm just going to make it again: look for free alternatives. Almost everything I use for my own startup has free alternatives. If you're starting a website you can find free analytics tools, free SSL certificates, free frameworks, etc. If I'm looking for time planning software, mail software, you name it... There are free alternatives.

Start small

Don't do large investments if you're not sure if you are going to get that money back. I've seen many clients building a large product, and then launching it, just to discover that nobody is waiting for their product or it didn't work out as expected. There is hardly any scenario where you can't build a very small prototype first to see if the people like the idea. If your customers like it, you can start implementing more features.

Consider renting

In some cases renting might be cheaper than buying, so always ask yourself first if you really need to buy that new item. For example: if you need an expensive printer for just one year but it's beyond your budget: rent it. If you just need a car a couple of times per month, it might be cheaper to rent one.

Work digitally

Probably a big cost saver for me is to work digitally. I send all my contracts and invoices digitally, I keep my administration digitally, I never send any printed letters (I use e-mail instead). Not only does it save money, it's also much faster.

Experiment with marketing

Don't spend your entire marketing budget in one place. Try different channels, possibly with different customer segments. Measure your return on investment, adjust the way you advertise, measure the differences, etc. Just keep experimenting with it, spend small budgets in different places. In the end probably learned a lot about selling products, and you (hopefully) found the ideal way to promote your business.

Summary

If you combine the tips above, it's hard to make any losses with your business. For me it worked out very well to start with zero budget, try free alternatives and to start everything in small proportions. When I start something new, I usually try if it works with a small prototype first. If my plans don't work out, I can just throw them away and start with a new idea without having big losses.

I'd love to hear about your ideas on this subject. Please post any tips in the comments below.

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Startups

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about

Name: Leon Cullens
Country: The Netherlands
Job: Software Engineer / Entrepreneur
Studied: Computer Science 
Main skills: Microsoft technology (Azure, ASP.NET MVC, Windows 8, C#, SQL Server, Entity Framework), software architecture (enterprise architecture, design patterns), Marketing, growth hacking, entrepreneurship

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