Starting a small business can be costly: time, money, your sense of security. But hey— you’ve got a dream; now it’s time to plan your budget. What should you actually expect to spend during your first year in business? Keep reading to find out…
The Magic Number
According to our friends at Shopify, more than one-third of small businesses that don’t last long after launch attribute their failure to a lack of money. As a small business owner myself, I thought it important to help other SMB owners understand the reality of what it will cost to run their small business in the first year—and do so successfully. So, how much should you have stashed away to ensure the success of your small business in its first year? According to a survey conducted by Shopify consisting of 150 aspiring business owners and 300 SMB owners in the US, the magic number is $40,000. Of course, the amount varies depending on your industry, business model, how many employees you have (if any), etc.—but more on that later.
The businesses surveyed by Shopify all allocated their budgets accordingly (take a look at the graphic below for more details on what to expect): products (raw materials, inventory, etc.), operations (legal fees, software, accounting, etc.), eCommerce (website, hosting/domain, development, design, etc.), shipping (labels, packaging, etc.), offline (rent, gas, etc.), employees (salaries, benefits, etc.), and our favorite: marketing (branding, logo, ads, printed materials, etc.).
Solopreneurs vs. Team Effort
It’s normal for startups and small businesses not to see much in terms of profit during the first year of operations. However, it is important to note that solopreneurs spend closer to $18,000 in their first year of business, whereas SMB owners with up to four employees spent $60,000 in their first year. So, as you can see, whether you’re running a one-person show or heading a team effort will greatly influence your spending.
Speaking of things that influence your spending, every wise business owner knows it’s crucial to expect the unexpected (can you say COVID-19 pandemic?). However, some of the more common hidden costs that seem to sneak up on owners in their first year of business often include: shipping, legal costs, inventory and product, and taxes and accounting. You can read more about these unanticipated costs and how to plan for them here.
Key Ways to Save
Now that we’ve taken a look at some of the most common costs of starting a small business, let’s examine some key ways to cut costs in your first year of business:
- Do your research: Business owners who overestimate costs will end up paying more than they have to — it’s that simple. Just a bit of research can help you discern fairly-priced services from those that are bogusly priced; saving yourself a whole bunch of money in the process.
- Plan ahead: You’ve nearly made it to the end of this blog, which is a great first step! Now, do what you need to plan ahead and be as prepared as possible for funding the financial aspect of your dream business! Research your market and examine your business from all angles to understand your future needs.
- Find guidance your trust: Seek out low- and no-cost small business advice and guidance from other business owners who have been in your shoes—particularly within your industry. As far as digital marketing is concerned, here’s a list of free tips, tricks, and training sessions from the TTG vault to get you started!
Guidance You Can Trust
Speaking of finding guidance you trust, working with an experienced small business mentor can do wonders for your wallet. Find out how a TTG Mentor can help you realize your dreams of starting your own business while helping you to carefully strategize and budget for your future.
For even more advice, attend our LIVE, FREE training webinar, “Built on a Budget – Making the Most of Your Marketing Budget” on Tuesday, June 22nd at 1pm ET! We’ll be teaching you where to find free resources that will elevate your brand, plus providing our best tips for setting marketing priorities to maximize your budget. Register now to submit your budget-friendly marketing questions!