Building a business from scratch can be stressful, expensive and nerve-racking all at the same time. One question we are asked frequently here at Clarke Bell is ‘how do I start a business without getting into debt?’ This is a primary concern for the majority of budding business owners as they set off on their first commercial venture.
Unless you have a large starting pot of cash or buffer to get you started, the chances are you will need to source some form of investment to get your business off the ground. A loan or other form of investment doesn’t have to put you into massive debt though; not if you are careful with your decisions and have a solid business plan in place. With that in mind, have a read of these tips on how to start a business without getting into debt.
Don’t Quit Your Day Job
If you have an existing job and a solid line of income, do not let this go too hastily! Too many entrepreneurs jump the gun too early and leave their day jobs in pursuit of their new business venture. However, this usually ends in financial difficulty as you can no longer support yourself in this circumstance without using some of your business’s money.
In the early stages of your business you should avoid dipping into your funds as much as possible. Having to use funds to provide an income for yourself can be too much pressure too soon for the business to work. So keep your day job right up until the time where the scales tip and your business can comfortably facilitate your desired income. Build up your clientele before quitting your day job.
Consider Working from Home
Having your own office is great and offers a professional touch when meeting with prospective clients. But is it really worth the expense in the early stages of your business? In most people’s cases, the answer is no. So don’t be afraid to work from home until you’re financially ready to make the move elsewhere. Most of your clients won’t actually care where you are based, as long as the product/service you provide is satisfactory.
Fair enough, the home has many distractions, the main one being the fridge! But if you can overcome these and manage your time effectively, you can save thousands of pounds by working from home. Rent can be extremely expensive and this unnecessary cost can cause huge financial problems later down the line; especially when you rush things too soon! If you must have an office and have no choice about it, then you can still save money by purchasing second-hand office furniture.
Have a Clear Business Plan in Place
You would be surprised at the number of businesses that fail on a yearly basis, due purely to a lack of solid business plans. How can you expect your business to be successful if you have no concrete idea of where you wish to take it and where it currently resides? How do you expect to avoid debt if you haven’t put a plan in place to do so? Almost every expense and every investment should be expected and planned weeks/months in advance so none of this serves as a surprise to you. Business plans can change too so you don’t have to worry about creating a perfect, rigid finished piece first time.
Scale up Only When you Need to
When you first begin your business adventure you may feel as though you need an accountant, a PR person, a design team, etc. This is simply not the case, however, as all you really need is yourself! Scaling up too fast can take up too many resources and too much money, meaning you will start haemorrhaging cash before your new staff members even have anything to do. It might be worth your time and expense hiring 1 or2 helping hands, but that’s as far as you should take it initially.
If you don’t have the clientele to support additional staff members, then you shouldn’t hire the extra hands. Hiring people too quickly can lead to loss of money and the prospect of having to let somebody go due to lack of business. This is where internships and apprenticeships can come in really handy!
Just Accept the Situation
This may sound a little strange and slightly counterproductive, but accepting the somewhat inescapability of debt can actually prevent you from going into debt! Or at least it can prevent impending debt problems from getting worse. If you let debt and all of the associated stresses get on top of you then it will cause you to act and think differently. It may even cause you to panic, creating a worried environment in which you may make some rash and ill-advised decisions.
Accepting the fact that there is a good chance your business will one day be in debt will actually help you deal with it effectively when the situation arrives. It may also ensure that you are a lot more careful and precise in your decision-making beforehand, so you may avoid going into debt altogether. Debt is not always crippling and often it is mandatory, so don’t stress out or let it ruin your life.
If you feel like debt has got out of your control, Clarke Bell can help you.