Being an entrepreneur is risky business. We’ve all read stories of startup companies that spent too much money getting off the ground and crash upon takeoff. Managing your money when you have very little coming in the door is tricky – but it’s not impossible.
After founding two companies of my own and surviving an entire summer in Silicon Valley on only $250, I’m familiar with the ins and outs of stretching a dollar. Arriving at smart decisions, making sacrifices, and putting yourself out there are the essentials of becoming a success on a small budget.
Here are my strategies for getting the most bang for your buck as an entrepreneur:
- Take advantage of free offers. Many people shy away from free stuff; they’re afraid that taking advantage of it implies that they don’t have money. Instead, look at it this way: when a company is offering something for free, they believe the item has value. They want you to experience it so badly that they’re willing to give you a taste at no cost. Take them up on it! You’re helping a fellow businessman out, and you’re saving cash on your end.
- Go to startup events. Startup events usually have great free food — which we know you’ll take advantage of — but they also provide opportunities for you to make valuable connections. Startup events are frequented by those who have similar interests, and most of these people are operating on shoestring budgets, too. Many of them are happy to introduce you to someone who can help your startup; others will be willing to develop a “quid pro quo” relationship with you to get both of your businesses off the ground. Either situation is a cost-effective win-win.
- Find a cheap place to live. I know, I know. You started your own company and went out into the real world, thinking you’d never have to live at home again. That’s the first lesson of entrepreneurship: we don’t always get what we want. Family can be a great asset for you in your quest to save money, so don’t overlook the advantages of living with Mom and Dad because your ego is in the way. If you don’t have the opportunity to live with family, then utilize Craigslist or Airbnb to find a cheap place to live. Negotiate your living costs down as far as you can — most people spend a quarter or even a third of their income on housing, but that money needs to go into your business.
- Access an incubator and use other business resources. Incubators can provide you with a lot of the structure that your entrepreneurial endeavor is missing, but without any of the interference that a partner company might entail. They have amazing free resources; these can include everything from office space to snacks. Search for one on Google, or try lists of ranked startup accelerators to find a good fit. You can also try techies for recommendations (there’s probably one in your startup!). Beyond an incubator, you can benefit from using resources like Microsoft Bizspark or Startup America. Both of these programs provide the resources of a large company, which can be particularly useful as your company expands, and you need more push or capital to get you to where you’re going.
- Track your finances. From the start, you should be carefully watching how much you spend. Use a smart system like Mint or inDinero to keep an eye on your finances. Cash flow is one of the easiest areas for startups to get ahead of themselves — you need to turn a profit at some point, but you’ll never know where that point is if you don’t track your money.
- Make smart hiring decisions. It’s important to build the best team possible. When I built my first company, I was still in high school, and not all of the people I recruited were 100 percent committed. It was incredibly difficult to manage the team and grow my company as much as I could. Your startup is your baby. Find people who are all in, and you’ll get the most from them with each of their paychecks.
- Avoid burnout. Many entrepreneurs get so caught up in saving money that they find it hard to balance rewarding themselves with pumping money into the company. If you want to be successful with your startup, then you should enjoy what you’re doing. Your “reward” will be the excitement you reap from your success. That means that most of your money should go into your startup — but not all of it. Set aside time (and a little money) to travel, visit friends and relax. If you forget to do these things, it won’t matter how much money your startup has — it won’t have an effective leader.
Every entrepreneur goes through ups and downs; it’s the nature of the beast. But struggling to make ends meet doesn’t have to be one of your problems. Find the balance between fueling your jet and pulling back on the throttle. You don’t want your startup — or you — to crash upon takeoff.
The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. The YEC recently published #FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good), a book of 30+ proven solutions to help end youth unemployment.