How to Use Your Money in the Setup Phase
Whether you have sufficient funds to support your business or not, it’s important to spend your money effectively in the early setup phase. The way you use your money in the initial stages can make or break your business and its survival. When you don’t have an endless supply of funds, you need to make them last until you can survive on cash flow, before you start making actual profit.
What do we mean by the early setup phase?
We’re not talking about those who have already reached the startup business phase of making at least some income, up to a monthly recurring revenue (MRR) of $15,000 to $20,000. When you get to that stage, that’s a whole ‘nother story. There will be a host of different ways to spend and manage money then, in order to maintain and grow your business effectively.
Here, we’re talking about those that are far from making their first business income. The initial setup phase is when you’re just starting to get your ideas together to launch into the big business world. This is the stage when you’ve just done the research and decided that your business is worth having a go at, and find yourself wondering, “OK, so now what? What do I buy first?”
Every business is different.
In this article, we’re going to share the most common and effective uses of your initial setup funds for your startup. However, keep in mind that everyone’s case is different depending on the business structure, available funds and the products or services the business will be selling. For those that are starting an online only business as a sole trader, startup capital of $5,000 might be enough. But for those opening up a shop and selling goods and services, $100,000 might not be enough. This article should serve as a guide to deciding where your money is best spent, when considering its long-term usage.
Now that we’ve got that out of the road, let’s take a look at the most important things to buy and set up using your initial setup funds, and how to go from there.
Register your business name. (From $34 per year)
Registering your business name is a simple process that you can do by yourself, without paying fees for other companies to do it for you. To register a business name with ASIC, it costs $34 for 1 year or $80 for 3 years.
It’s a little costlier to register a new company with ASIC:
- 201A Public company with share capital $469
- 201B Public company limited by guarantee $387
- 201C Proprietary company $469.
Depending on your business structure and services, look out for anything else that you might need to register for on the business.gov.au website.
Get a laptop. ($500 – $1,200)
Or a phone or anything else you might need to operate your business. Even if you’re old school and want to stick to pen and paper, that’s just not a good business decision. You need to make your business 2017 friendly, which means you need to get to the level of your suppliers, customers and the general public. This means that you need a computer to write and receive emails, monitor your website and other digital activity, review reports, do market research and anything else that your business and customers require.
Now, don’t go buying $2,000 laptops that you won’t even know how to use half of its potential for. You don’t need expensive gaming laptops and additional gadgets to write emails and do some basic functions online. There are a number of simple and light laptops made for precisely this reason.
Build a website. ($0 – $10,000+)
If you thought that you didn’t need to invest time or money into a website or any other online-based activity, think again. With the internet having become a must-have component of our lives that almost feels like a human right, there is no better platform to advertise your business than online. And these days, people don’t just look at an online ad and call up the company. They want to have a look at what it has to offer by screening the website first. This means that you need to give them something to click on and read about your business. A business without a website in this day and age risks losing credibility.
Building a beautiful and highly customisable website is actually quite easy with content management systems (CMS) like WordPress and Weebly. Depending on what you want it to look like and do, you could pretty much build it for free or pay over $10,000. Building a basic website by yourself, just using a pre-made free theme, can actually be free. But if you need additional functions and completely custom website design, you’re most likely going to need someone to do the work for you and it can become a big investment to make.
What goes on your website?
Even if you’re not necessarily using your website as your daily income source, such as selling products online, it’s important to have a polished website that doesn’t leave visitors with any questions. Just think of it as an online CV for your business. What’s its name, location and profession/expertise? What is its experience? What can it do for your customers? How much do you charge? How can customers get in contact? The point of having a website is to present your business to the public so that they will want to use your services. So, don’t leave out any important details and don’t think of it as a chore.
Optional: One-off content writing or SEO work (from $180 per page or $200 per 500 words on average)
You don’t need to do this if you’re a good writer or familiar with how search engine optimisation (SEO) works, in order to make your website actually rank on search engines like Google.
Bottom line, how much should you spend?
If your business depends on your website like having an e-commerce platform, and you have no web development or design experience, then we would suggest spending up to a few thousand dollars to set up the right website for your business from the start. Do some research and shop around, as there are countless web designers around. Be careful not to go with the cheapest option though, as they’re likely to be students or beginners, and you want quality work done by someone with experience. Note that a complex website may need to have ongoing paid support.
For those that don’t need to rely on a website to run the business, and merely want to have a digital presence, could get away with spending $200 tops. However, this means that you need to choose the right theme or template for your website that is clean and attractive, and you will have to do quite a lot of research to work on your website’s SEO yourself.
Buy a domain. (from $9.98 per year)
Of course, you need a unique domain for your business to have a website. Well, technically you don’t if you want a completely free option, but nothing looks less attractive and unprofessional than having a .wordpress.com or .blogger.com as part of your domain.
If your business targets Australians, purchase a .com.au domain as it’s more familiar and seems credible to the Australian public. From hosting websites like GoDaddy, you can buy .com.au domains starting from $19.98 for 2 years. You can select the option to renew your domain name automatically every 2 years, so that you never have to worry about losing your domain.
Set up your business email. (from $7.99 per month)
The easiest way to create domain-specific email addresses is through a hosting company like Bluehost. In fact, most hosting companies let you choose a domain for free and provide an easy way to connect you to CMS like WordPress when you subscribe to their hosting packages. As an example, Bluehost services start at $7.99 (US) per month. From here, you can get support on building a website and create several email addresses (like admin or enquiries @businessname.com) to give your business a professional image.
Set up your shop or office.
If your business has a physical store or an office, make sure to budget for all the costs involved in setting it up. This means making room for any costs involved in the commercial lease, renovation, other functional equipment and even a fit-out design specialist in case you need some professional help. The costs are vastly different depending on the size, the degree of customisation. furniture and the amount of additional equipment you need. Shop around online and ask for referrals to find out the best suitable deal for your shop. If you have a good relationship with your employers, it might be worth asking them for a referral to the contractors that set up the company offices.
Don’t forget signage for your shop.
Make sure to leave room in your budget for signage for your store or office. You don’t want to proudly see the finished premises only to realise that there is no logo or signage to represent your brand. Installing signage is generally not that expensive. Check out Signarama and Easy Signs!
Office options – private, shared, virtual, home
Depending on your business idea and circumstances, you might need to look into having an office that’s not the traditional private kind. If you’re strapped for cash or you think you’ll be out on the road half the time, you don’t actually need to spend hundreds of dollars each week to have a private office space. Instead, look for shared offices in your city like Office Hub. Most of these shared workspaces come fully furnished with shared kitchens, conference rooms and other additional services like reception for your business.
You can also look for a virtual office to just use as your business address. For a cheap fee, you can get a business address and most of the time, your mail will be stored by reception for pick up or even emailed to you.
If you’re considering working from home, make sure that you’re in the right time and space for it. For example, do you have a quiet place with a desk, preferably not in your bedroom? Too much work in your own bedroom can add stress to your daily life as the line between work and life becomes too blurred, and you find yourself not being able to switch off even when in bed. If you don’t already have a home office set up to go, you may need to invest in some furniture like a desk and storage. Find the right balance between not going overboard with luxury items that you don’t need, and having quality enough items that you can comfortably spend long periods of time there.
And if you have little kids at home, you might need to budget for babysitting costs. You might think that you’re doing two jobs at once by working from home and looking after the kids, but what ends up happening is that you don’t do a good job at either. You’re half focused on both duties that you end up missing important things. Consider hiring a baby sitter so that you can focus on your job 100% during work hours.
Business cards and other print material (from $9.99)
Another essential way to spend your setup costs is on traditional methods of marketing like business cards and other print material. You may not need brochures and pamphlets right away, but business cards are essential. When you network with like-minded entrepreneurs or other suppliers, you need something to give them to contact you. Companies like VistaPrint can create 250 business cards starting at just $9.99. Check out Moo Print for more stylish and unique business card options.
Optional: Accounting software (from $25 per month)
Lastly, you can consider getting an accounting software for your business. This is optional as you don’t necessarily need software to do your accounting if you’re familiar with Excel and know how to generate invoices or manage payroll by yourself. However, if you’re starting with team members or employees and you don’t have any accounting help, you might want to consider online software that make it easy for you to understand how things work. With accounting software like Xero, it costs just $25 per month to start, or over $60 per month depending on the number of employees and other functions you need like managing superannuation. Try a 30-day free trial with Xero and see if this is a cost worth factoring into your setup budget.
As covered in this article, during the setup stage of your startup, the most important ways your money can be spent are on:
- Things you can’t go without;
- Things that are needed to operate the business;
- Things that will last; and
- Things with a high return on investment.
When in doubt, remember not to buy anything that you can’t justify, and don’t be cheap on marketing. The second most important thing to remember is to research and compare prices. You’d be surprised at how much money you can save by just asking around. Also, don’t be scared to try and negotiate! While not all traders will oblige, many will drop their prices a little if you ask nicely.