One of the hardest things when starting your own business is figuring out what is essential for your success and what can wait. This is particularly true when it comes to budgeting, because while you need to be frugal, skimping on certain essentials can decrease the chances of your company succeeding before you even begin. So where can you safely cut costs in the early days?
I reached out to Michael Collins, a Harvard MBA and founder of the Big Idea Group (BIG), an incubator and innovation consulting company that helps entrepreneurs “move their innovations forward.” Collins has personally invented and brought a number of products to market — including hardware, home goods, and toys — and has founded a number of successful companies. He now spends his days working with entrepreneurs on prototyping, crowd-funding, business creation and fundraising. Here is his list of the 7 areas to save money in the early days:
1. Researching the problem/opportunity and competition.
Collins does not mean to suggest that you can skip the research phase of ideation, just that you need to do as much of the work yourself as possible. “First-hand experience of the current alternatives, how and where they’re sold, and how they’re falling short will form the basis of your innovation. Don’t spend thousands for a top-down, canned market study that does this homework for you—and poorly,” he warns.
2. Trademark and URL search and securing.
Don’t be intimidated by the fact that you have never done anything like this before. Collins encourages entrepreneurs to do their homework in those areas that “are easy to do yourself, with the help of widely accessible how-to info.”
3. Hair-trigger patent filing.
When you come up with an idea it can be very enticing to file a patent immediately, but Collins warns that this can be a costly mistake. “Don’t file prematurely—your product often changes so much in development that early patent work won’t cover it. Also try to gather good evidence that you can secure meaningful protection for your intellectual property and that your patent will have a healthy ROI.”
4. Market testing.
A common mistake for entrepreneurs is to assume that their opinions and tastes perfectly reflect the market. Getting an outside opinion can help a lot, but it can be costly. Instead, Collin says, “If you can be objective, it’s best for you to handle informal market testing yourself. Be sure some of this is face-to-face, where you listen more than you talk, and watch as well as listen. Also, leverage online tools for surveying. Be open to suggestions without trying to incorporate every idea. And remember to reach out to retailers/distributors as well as end users.”
5. Basic business legal paperwork/setup.
Similar to trademarking, filing basic incorporation papers is not difficult, it is just new to you. “The basic company filings, bank account setup, and so on, are fairly simple (depending on your locale). And it’s good knowledge for you to have if you’re destined to be a serial entrepreneur,” Collins adds.
One of my least favorite jobs as an entrepreneur was creating and managing the budget and projections for my company. However, I agree 100% with Collins’ take on this issue: “You have to own, present, and live with your budget, so you’d better understand the numbers from top to bottom. However, it’s smart to have them double-checked, so tap into the help of experienced entrepreneurs who can offer real-life advice and sometimes a reality check.”
Many inventors loathe the sales process, but in the beginning you must become the best spokesperson for your own product — especially for investors who are investing in you personally as much as your idea. “You just can’t delegate this. You own the vision and plan and are responsible for rallying others to buy in. You also learn something from responses every time you pitch. As the business grows, you’ll hire others to support you in this role. But never let your pitch get rusty or stale.”
While it may feel like Collins’ is just advising that you do everything yourself, that is not the case. There are many things you can, and should, spend money on: some examples include a good beta site, branding and marketing. However, if you try to outsource the items listed above what you are really doing is asking others to do the heavy entrepreneurial lifting for you. Not only will you burn through the cash you absolutely must conserve to execute your idea before you’ve even begun, but your product and your plan will be weaker than if you’d taken the reins yourself. So buckle up and dig in!