Cutting corners on a lean start up budget is a very common ‘kill your business’ practice. When starting up a business, it is done because of lack and necessity. However, in terms of financial management, it could be something you regret later on. One of the most common examples of corner-cutting that I see is….:
Seeking the cheapest quote for equipment and technology just to get started, even though it is unlikely to handle anything but the lowest levels of activity!
Second rate equipment and technology may be fine for low levels of business at the time of initial start up. However, they may not be able to handle the increased volume of transactions and information that could multiply quickly as your business grows.
It could all be obsolete in a matter of weeks or months.
As customers hear of your leading edge offering and sales activity increases, expansion is a certainty. If you cut corners however, expansion may prove fatal. It may mean starting again with a complete scrapping of your low rate equipment and technology.
This means that you will have to invest money twice over in the first few months of trading. Not only that! Expansion may also mean hiring people and finding larger spaces. Expansion is generally a time of tight cash flow. It could spell the end of your business.
It seems ironic that your business could fail at a time when you have just weathered the storm and things never looked better. But it happens a lot. It is one of the common causes of business failure.
For more reading on starting up a business, financial management and your path to financial wellbeing, start reading from the library to your right!
Until next time!