A year and a half ago, my twin brother and I funded a startup called Guesty. From working almost every waking hour to not knowing when a paycheck would come in, it hasn’t been easy.
One of the biggest challenges was bootstrapping, or funding our own startup. If you’re funding your venture out of your own pocket, it’s crucial to find places to cut back so you can invest in the most important aspects of your business.
Luckily, our startup was accepted into an accelerator program, which helped keep us afloat until we gained enough traction. However, to get to that point we had to bootstrap our startup and be as frugal as possible.
If you’re an entrepreneur getting ready to launch a startup, here are a few ways you can save money.
This might not be what you want to hear, but the first place to start saving is with your own personal finances. You can’t live like a millionaire quite yet.
Begin by cutting down on the basics. Consider how much money you spend on eating out. Cathy Erway, author of The Art of Eating In, compared her expenses and discovered she spent more than $300 on a week’s worth of meals out, and only about $30 on the same number of home-cooked meals.
Clearly, that’s a lot of money you could put into your business. Buy your own food and make yourself delicious meals on a budget. Not only will you gain great cooking skills and save money, but you’ll also likely be eating significantly healthier.
Take it a step further by riding a bike to save on gas, hosting friends at home rather than going to bars, and buying less clothing and other items. Not only will your frugal lifestyle help you save and put more money into your business, but it’ll also reinforce important financial management skills that will take your business further.
Before you release your product or service, you need to make sure people will actually want to use it. Obviously, if there’s no need for it in the marketplace, your business will fail before it even begins.
However, you don’t need to pay for expensive focus groups or market research companies. You can easily handle this process on your own.
Start by picking your friends and acquaintances’ brains to get their honest opinions about your product: Can they see themselves using it? If so, in what context? What features would they expect? Take it a step further by launching similar conversations on social media channels such as Twitter.
Finally, take advantage of free market research tools to look at secondary source data, keyword research and even competitive analysis.
Doing your own market research will teach you a lot more than paying someone else will. Talking to potential customers and spending time with them to understand their problems is the most important thing you can do in your early days -- and throughout the company’s lifetime. You’ll conserve money for your business by observing what works, and what doesn't, before taking on major risks.
Marketing can be an expensive investment. It takes time, patience and careful strategy to yield results, and it’s an essential part of launching a new venture. Therefore, it's worthwhile to find ways to do it for less.
Start with creative social media campaigns to create an online community. Facebook, Twitter, Google+, Instagram, LinkedIn and Pinterest are all free services. Gain momentum by becoming a part of relevant groups and posting information about the industry and key problems you address. For example, offer your expertise about your niche on question-and-answer sites such as Quora or Reddit.
After that, consider using a guerilla marketing campaign. These techniques help you attract attention at minimal cost compared to a traditional marketing push.
For example, you could provide free samples of your product. L’Oreal recently gave 100 women makeovers complete with waterproof mascara, then showed them the movie Titanic to demonstrate the makeup’s effectiveness.
In the long run, this costs the company very little, since they produce millions of products per year. But it makes a huge impact, since people get to test the product in a situation where they’ll actually need it.
Giving a little helps you get a lot in return. Consider how your company could create a guerilla marketing campaign.
While you may want to hire a team to take your company to the next level, an experienced full-time staff will cost you. When you’re not yet in a place where you can pay a full salary, outsourcing is a great solution for accomplishing tasks at minimal cost.
To ensure you find high-caliber workers, look at reviews from previous clients and ask for samples of their work. If you’re still unsure, ask them to do a brief sample project to showcase their skills. This way, you know you will be getting the most for your money.
You can’t know it all. But luckily, others can fill in the gaps. Look for help from more experienced people who are interested in becoming mentors.
Start by attending local startup and tech events in your area with Meetup, a network for groups to get together within your community. Do your best to meet everyone and figure out what each person does, to see what you could potentially learn from them -- and if you could possibly contribute to their work.
Also, explore successful companies in your area and research their founders. Try to reach out to them on Linkedin, and see if a shared connection can introduce you. If all else fails, take a direct approach.
If more experienced people in your industry believe your idea has potential, they may be willing to give you advice in exchange for shares or other forms of equity. This pays off for everyone involved. The mentor feels flattered and has a new place to share her ideas, while you gain a connection and valuable advice while saving cash.
Launching your own startup can be both daunting and incredibly exciting at the same time. But by coming up with creative ways to get to the next step on a budget, you’ll be better able to make the most of your ideas.
Your Turn: Have you launched a startup, or do you plan to? How did you or will you stick to a budget?
Disclosure: We have a serious Taco Bell addiction around here. The affiliate links in this post help us order off the dollar menu. Thanks for your support!
Amiad Soto is the CEO and co-founder of Guesty. He loves traveling and extreme sports and working on cool ideas.