Entrepreneurs Discouraged by Startup Costs: There are Benefits to Not Having Enough Money

A Future Millionaire

Boy mows lawn

Brad has a common problem for entrepreneurs.  A lack of seed money makes growth difficult.

Brad is 10 years old with a goal. He wants to earn $210 in 3 months to go to summer camp.  He starts thinking about ways to earn money.

He makes $5 every time he mows his parents’ lawn. He would have to mow the lawn 42 times to make the $210.  He knows he can’t mow his own lawn 3 times a week. He must start mowing 5 people’s lawn every other week to earn the money in time. He has a goal and a target market. He is already ahead of many entrepreneurs.

 Brad asks his mom if he can start a lawn mowing business.  She agrees and offers to provide him with the equipment, but he needs to cover the cost of printing fliers and gasoline. He calls a print shop and a gas station to get prices. Printing 30 fliers and buying 3 gallons of gas will cost him $10. He only has $3.  Like many entrepreneurs, Brad feels discouraged with the startup costs of his new business. His brother offers to lend him money, but he hates owing his brother money.  Brad wonders if the fliers will bring him enough clients to make the cost worthwhile.  He is already thinking of customer acquisition costs.  Years of watching Mark Cuban and Mr. Wonderful on Shark Tank are paying off.

 

The Tightrope of Growth and Budget

Startup costs discourage and overwhelm many entrepreneurs.  Like Brad, many new entrepreneurs look for ways to keep costs low.   Keeping your budget low reduces the need for credit, but it also affects growth opportunities. How do you minimize debt and maximize growth? Marketing, branding, inventory, supplies and professional services cost money.  Should you jeopardize your future by using credit?  Do you keep your overhead low, but lose opportunities grow the business?  Where do you spend your money? Do you contract with a content marketing specialist, a copywriter, a web developer, a professional employer organization? Do you buy the very best tools, go to a trade show, and get training in a new technique? 

Operating on a shoestring budget creates difficult decisions for growth oriented entrepreneurs. Every time you decide to spend money in one place, you have to skimp in a different place. Many entrepreneurs get so discouraged by startup costs they give up their goals.  A shortage of capital makes decisions about growth difficult, but it isn’t all bad. It makes you think through every opportunity and cost carefully. This leads you to clearly define your operating costs and profit margins.

Always consider time, money and quality.

Always consider time, money and quality.

 

Start Small or Go All In?

 Beverly started her catering business slowly. She began cooking in a restaurant kitchen, working around their hours.  The rent was cheap, but it was inconvenient. She could only cook early mornings limiting her growth opportunities. She did eventually upgrade to her own kitchen. 20 years later she is still in business, but it’s a small operation.  Would her life be different if she started her catering business by investing in her own industrial kitchen, hiring two cooks, and a marketing team? Yes. She might have gone bankrupt or she might have been a leading catering company with 200 employees.  Beverly decided to start small and minimize risk.  Minimizes risk also means minimizing reward.  She isn’t rich, but she earns a decent living with her small catering business.

 Not spending seed money frivolously allowed Beverly to stay in business and be profitable.  Not taking many risks with seed money did not give her many chances for growth and expansion.  Sparse seed money for startup costs forces you to clearly define your goals.  Evaluating your goals and the path to achieving them is a valuable process.

 

Business to business companies often advise entrepreneurs, like you, to contract their services. They claim their services grow your business, earn more revenue, and allow you to focus on your core business.  Business to business services can definitely help you achieve your goals.  But you have to be ready for the growth. Even if you have plenty of seed money, take the time and effort to clearly define your goals.

Only hire a copywriter when you understand what you sell and who your audience is.  Hire an SEO expert when you have enough content to make your site help your customers. Don’t spend money on the best tools until you have the training to use them.

Back to Brad …

Brad decided to print 15 fliers instead of 30. He put them around the neighborhood and he went door to door to offer his services.  By starting small, he kept his startup costs to $5. He only had to borrow $2 from his brother. Within a week, he had 3 happy clients and paid off his loan and had a small profit.  He returned to the print shop and spent $3 for color fliers. He passed them out during a community yard sale.  After 3 weeks, he had so many clients he had to decide if he should hire a friend.  The frustrations of the young entrepreneur about startup costs were a distant memory. 

And he earned enough money to go to soccer camp.

Still Discouraged?

Some entrepreneurs were falsely led to believe that starting your own business is simple and easy. It isn't easy or simple.  Having more money might feel less stressful, but it doesn't replace hard work. People who waste their seed money, without putting in the hard work of building a value oriented service or product just lose more money.  

When you put careful thought into spending your valuable resources and building your company, you will reap greater rewards.

Are you Ready to Grow?

Cuttlefish Copywriting helps entrepreneurs build their brand, attract website visitors, and convert visitors into loyal customers. Contact me when you know who your target audience is and what you can provide for them.