“Do not fool yourself. You can’t get it alone. So let your employees participate in the success of your business. After all, this is a boat full of crew, even if you carry the helm and you are the one who does not sleep at night. If it sinks, you sink all. So, if things go well, let the crew know. And if they go wrong, you tell it to your pillow. ” -Fernando Vilches Guijarro, founder of viajeconnosotros.com

 

Despite the rise in start-up companies, crowdfunding sites, and low-cost software many entrepreneur’s struggles to build a success story around their business.

Saving money and generating capital to start a business is difficult and we have all heard stories about famous entrepreneurs working in their bedrooms and barely surviving when they started their business.

That is why moderation and spending money wisely from the start makes perfect sense for the following reasons:

1. Spending rationally instils a disciplined culture of savings and investment. Examine each expense to ensure the highest possible value of each peso that maximizes and justifies your entrepreneurial capital.

2. Few companies are able to rely exclusively on internally generated funds (income and/or benefits) during the initial stage of building a foundation for the company’s long-term sustainable growth. An investment acquired by loans is always required, a process that inevitably dilutes the founder’s control over the company.

Extending the period between the start-up of the business and the need to inject additional capital for later stages tends to expand the group of competitive entities that can invest, and is generally reflected in a lower capital cost, either in the form of decreasing interest rates or greater equity in entrepreneurship.

3. The delay in the need for foreign capital to prove your concept, the quantification of potential income, and/or reach a certain level of profitability improves your negotiating position with potential investors.

Simply put, reduce expenses to the maximum of your cash flow, which in turn will reduce the level of income needed to reach the breakeven point, and increase profits.

For spendthrifts and big spenders, I would recommend you to give a read to “How to Save Money from Monthly Salary?”  which would help you pull down your unnecessary expenses and overheads, giving useful suggestions.

Now, let’s look at the five easy ideas for saving money for the newbies. Here’s a rundown:

1. Postpone personal benefits

Starting and owning your own company can be an exciting experience, particularly if success comes early. However, it is important not to fall into the trap and use the capital for the growth of your business instead of personal benefits.

You can keep your initial capital and save money by doing the following:

1. Set your salary as low as possible, along with performance bonuses.

2. Limit benefits to employees who are not legally or competitively required.

3. Use functional but not extravagant workspaces.

4. Travel and pay personal entertainment issues by personally paying your bills, and not the company.

Reduce your cash flow and the burden of the company’s expenses, maintain your base capital, reduce the distance between the point of return and the point of balance and set the example of austerity and internal discipline of the organization, which is important in the first years.

2. Focus on critical tasks

According to VC and author of ” Hearts, Smarts, Guts & Luck ” Tony Tjan, almost two-thirds of entrepreneurs are driven by the vision and unwavering sense of fulfilling their purposes. They have a passion and a “natural narrative ability.

However, entrepreneurs often overlook details and lack the necessary attention for an idea to go from being just that and provide benefits.

If your ability is to “sell the dream” – a critical ability to raise funds and inspire your employees – instead of being guided by pragmatism and rationality, you need to be careful not to try to do too much in a short time.

Do not use the cash and limited resources of the company to follow attractive paths that do not require critical attention to meet immediate objectives.

Smart entrepreneurs realize that they cannot do the same things for all people, and instead, they better focus exclusively on tasks that require immediate attention in front of them. 

Focusing allows you to move from one finished task to the next, placing your service or product on the market as soon as possible and keeping non-essential costs low through a work contract and virtual offices.

It allows you to be agile by adapting to the twists and turns of a volatile customer base, as well as the intransigence or inefficiency of expensive suppliers, processes and procedures. Focusing means that you only need to spend the money necessary to achieve immediate goals – no more, no less.

3. Hire only critical capabilities 

Newly created companies are necessarily based on a few key individuals with critical skills to build the company and direct it to the highest levels of success.  

Realistically, few companies, including those of recent creation, have prominent and responsible employees at the top.

As an entrepreneur, you must understand that skills are important at every stage of your company’s growth, relying on your own talent to hire and compensate other key employees as you need them.

Next, “If you are not going to be able to pay……don’t hire” – Javier García and Miguel Ángel Lubián,( founders of the CIES Institute)

We will be consistent, then come the regrets. If your company does not have volume yet to have a worker on staff to take care of a specific area that needs support, outsource that service until you can pay your own employee. 

On the one hand, you will reduce expenses, without giving up obtaining value services contracted to third parties. On the other hand, you are not going to waste your time … and the effort on anyone!

It is essential to know the human resources that you should use in each department and not create false expectations when you are starting. Think twice before making this mistake. Don’t confuse a production peak with a long-term need for your company. ”

4. Don’t reinvent the wheel

“Everything that can be invented has already been invented” – Charles Duell, (commissioner of the US Patent Office in 1899)

Certainly, we can’t go with this assertion every time as an entrepreneur must recognize that a lot of ideas have been invented, tested and proven to be effective.

Thomas Edison said he didn’t want to invent anything he wouldn’t sell – advice that every manager should follow. Before incurring spending on doing something original, you should investigate to see what is available in the market for a better cost than you could incur for a customized solution.

Incorporating legal papers and forms of all kinds is a common action on the Internet and a third of manufacturers supply volumes of products ranging from processed foods to clothing for a negotiated price, while logistics companies collect and ship the products all over the world. 

Computers and communications allow virtual offices to be available 24/7 to vendors, customer service representatives, employees, lawyers, and other administrative services. Even specialists in marketing and sales can be done externally by specialized “hitmen” with experience and unique contacts.

Thus, examine your operations to ensure that the activities carried out are essential and are carried out at a lower cost than you can pay elsewhere. Critical activities for your success must be carried out by your employees, mainly the control to ensure that your competitive advantage is sustained, while non-essential services are purchased at the lowest price.

5. Share the wealth

The increase in compensation is significant if cash bonuses, stocks, and options, or tangible economic benefits, are powerful motivators to meet defined performance goals.

 

Commission sellers have been paid for the results for years, while profit-sharing plans have been in use for more than half a century.

Performance through benefits for the achievement of objectives measured by results such as objectives achieved, deadlines met, productivity, cost savings, and other tangible measures encourages positive results, especially when the objectives are easy to define, understand. And employees and contractors those responsible have the necessary skills to provide their services.

Entrepreneurs must pay for performance and not for presence, rewarding those who consistently meet the defined objectives in time and replace those – employees, contract workers, or consultants – who do not meet what is defined.

However, before implementing a performance-based incentive, you must be sure that you understand and define the objectives appropriately, recognizing the possibility of unintended consequences when setting objectives without analysis or control.

For example, in the 1990s, Sears set sales targets with appropriate rewards of USD$147 per hour for auto repair personnel. Subsequently, complaints were raised by consumers because employees charged and billed unnecessary activities. 

In other words, if you are going to generate economic benefits for performance, make sure it is not at the expense of the customer experience.

I hope I was successful in delivering useful insights to all those entrepreneurs who were in search of finding out ways to acquire financial benefits, ignoring the overheads and using the wise and feasible alternatives.

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