Building A Budget-Based Business

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Building A Budget-Based Business
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Are you planning to launch your own business but worried about finances? Many people have successfully started their own one-person or multi-person companies on a shoestring. You can do the same thing by following a few simple rules and keeping your eyes on the prize, as they say. In this case, the prize is long-term profitability and you stay focused by cutting key costs wherever you can. What are some of the areas in which you can minimize outflow and maximize income? Space rental is probably the main one, with salaries, inventory, and advertising right after it in importance and impact. There’s no magic formula, and it’s possible to save a significant amount of money by using just one or two of the four methods listed below. The point is to survey your financial landscape and decide what, for you, is the best way to move forward.

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Use a Home Office

When you start out, working from a spare room in your home is the easiest and most effective way to save money. It's not always the ideal way to get things done, but there are trade-offs with every strategy, so plan to spend the first one or two years of your company's life working from your home.

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Calculate All Your Personal and Biz Expenses

Constructing a company that is focused on bottom-line budgeting means keeping a close eye on every dollar you spend. If you put your personal finances in order first, you'll know exactly how much of your own cash you can plow into the enterprise. Seed funding is a crucial step, and a make or break one, for most new entities. Many a great idea has died due to lack of monetary support from day one. For example, you can boost the amount of leftover money from your personal budget by making every expense predictable and as detailed as possible. Consider doing things like signing up for average pay plans with utility companies in order to have a set monthly expense for energy. Likewise, you can slice a significant amount off your total outflow by refinancing student loans. Not only will a typical refi help lower your recurring payments, it can offer more advantageous interest rates and reasonable repayment terms.

Be a Sole Proprietor at First

You'll save a bundle of cash and avoid endless headaches by opting to work alone, at least for the first year of your venture. The big bonus is there's no salary expense, which means that if you are working from home, your total expenses are minimal. Even as a solo owner, remember that you'll still need to outsource some tasks to others, but they won't be employees, so you'll have no need to deal with tax-related issues surrounding paid employees.

Sell a Service or Intangible Product

To avoid dealing with the cost of carrying, storing, and keeping track of inventory, consider selling either a service, like consulting, or an intangible product, like e-books. Service-based businesses are free of many of the hassles that go with product-based ones, which means you never have to worry about theft or depreciation either.

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Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at AnkurShah47@gmail.com
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