Staying lean when you're building an online businessApr 24, 2023
Building a business and developing various entrepreneurial endeavors have fascinated me for most of my life. Growing up, I was exposed to the entrepreneurial lifestyle through our family businesses. My father owned a grocery store, a restaurant, and a little over two hundred residential rental units. I didn’t plan to follow his exact path, but I definitely learned the value of taking risks and stepping out on faith as I observed his example.
Most of the business owners that I have been familiar with throughout my lifetime have taken on various forms of debt when attempting to establish their businesses. For some, that has worked out well. For many, that has created problems that ended up hurting them in the long run. It’s a mixed bag.
Most of my early business ventures involved high overhead costs and required me to obtain outside financing. This was particularly true when I started buying vacation homes in the Pocono Mountains to rent out for family vacations. It ended up being a profitable way to earn an income, but I was highly leveraged and I didn’t understand the value of holding onto cash reserves in case of emergencies. I was also still in my early 20s when I was doing this, so I don’t think I was terribly convinced that emergencies were something I needed to worry about at that season of life. I was wrong.
Eventually, I sold my vacation rentals at a profit, and I paid off the outstanding debt I was carrying on them. Because I was so highly leveraged, I felt relieved to remove them from my life, even though they were income generating assets.
In the midst of working with various lenders, I developed a fascination with the real estate lending process, and I became a licensed mortgage broker in the state of Pennsylvania. I set up a business entity and opened an office in Peckville, Pennsylvania. The cost of my training, licensure, and other business expenses was more than I could afford, so I borrowed my startup capital. Looking back, that was a mistake. Not long after I started my business, the real estate market crashed and most of the lenders I was working with went out of business. In the midst of that turbulent time, I shuttered that business after about two years of operation.
From there, I ventured into an innovative online idea for the time. I hired a web developer to help me build an online social network for small business owners. I paid $12,000 out of pocket to get this established back in 2008, and even though it was a practical idea, I didn’t understand marketing well enough for it to truly succeed. The idea was quickly overshadowed by other online social media giants as they started growing exponentially.
Since that time, I have learned the value of starting and staying lean when I have a business idea I want to get off the ground. I have also become averse to debt. At this season of my life, I no longer carry business or personal debt, and I don’t want to go back to doing so. I’m not saying everyone needs to do that, but it’s the path I prefer. So when I have new ideas, I try to keep my expenses low, and I make sure I’m able to finance them with the resources I have on hand.
Keeping costs down when starting a business is crucial for four reasons:
- Cash flow: When you're just starting, cash flow can be tight, and you want to ensure that you have enough money to keep the business running. Keeping your costs low will help you conserve your cash, so you have the money you need to invest in growth opportunities as they arise.
- Profitability: Starting a business requires a lot of investment, and it may take some time to start generating revenue. Keeping your costs low will help you become profitable faster, which will be important in sustaining your business in the long term.
- Flexibility: When you keep your costs low, you're better positioned to adapt to changes in the market. If you have a lot of overhead expenses, it may be challenging to make changes to your business model or pivot when necessary.
- Investor appeal: If you're seeking outside funding, investors will want to see that you're being responsible with your expenses. Showing that you're keeping your costs down will demonstrate that you're focused on the bottom line and have a plan for profitability.
I recognize that building a business or an online platform without much money can be challenging, but it's not impossible. Here are some tips on how to get started:
- Start small: Focus on what you can do with the resources you have. Start with a small product or service that you can afford to produce or provide, and scale up as your business grows.
- Utilize free resources: Take advantage of free resources such as social media, online marketing platforms, and networking events to promote your business.
- Leverage your skills and network: Use your skills and connections to create partnerships and collaborations that can help you grow your business without spending much money.
- Bootstrap your business: As much as possible, use your own savings to fund your business instead of taking out loans or relying on investors.
- Keep overhead costs low: Avoid unnecessary expenses by working from home, sharing office space, or using online tools to manage your business.
- Focus on generating revenue: Keep your focus on generating revenue from your products or services, and reinvest your profits back into your business to fuel growth.
It’s possible to start a healthy, thriving, online platform or online business with very little cash out of your pocket. In some cases, it’s possible to get things started for next to zero especially if you’re focusing on creating content or offering a service.
Get creative, and utilize resources like social media, Etsy (if you want to sell physical or digital products), Squarespace, Podbean, and Kajabi to build a foundation for your online business. Even some of the more expensive online tools won’t cost you anywhere near as much as a brick-and-mortar business or rental real estate will cost to lease and buy.
Stay focused on serving your audience and meeting their needs, and before long, I believe your online presence will experience organic growth that will help you launch the next leg of your business as it develops and matures.
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