How can a startup save money? Personal advices from Sergey Atamas
Anybody with an idea and a desire to bring something new onto the market can create a startup. Business models are developed differently, depending on the knowledge, experience, available time and level of initial capital of those involved. However, in most cases this recipe lacks one of these components, which is why most initiatives do not reach the stage of entering the market and gaining sales.
Obviously, available funding increases the survival chances of a startup, but does not guarantee its success. A number of our corporate clients had actively invested in startups, despite unfavorable results on the performed feasibility study, and consequently reached their dead point in 2 or 3 years. The key question is how to manage the costs of the startup seed stage, and take the company to the profit zone.
Example №1. You have only an idea and a selection of case materials
It is believed that at the idea stage, it is enough to have a representative concept of 10-15 slides with the project description, and that you can prepare this concept yourself by consulting different Internet sources, attending free training done by incubators and studying the recommendations of US venture capital funds.
You would know how successful your work was, after the first promotion of your concept. Sending it to business angels and other investors, or presenting it at meetings, you would receive feedback on it and thus know where should you correct, verify or change completely.
This representative concept should not be your final destination, but you need to start developing your business plan. Here, you may encounter some difficulties. The concept may go well due to a great design and stunning idea, though when we come to the business plan, there are certain fixed standards and you will need the experience, skills and assistance of different experts. Now, everything depends on your communication skills and connections. I have at least a few people who by a quid pro quo developed very decent business plans.
In general, the preparation of a representative concept and business plan, as well as the initial promotion of the latter, can be done at almost zero expense, if you have developed an entrepreneurial spirit and you properly delegate tasks in exchange for your assistance or help in other matters. Well, if you were a vet, would you treat the pets of your friends in exchange for the prospect of becoming a millionaire?
Example № 2. You have already developed a business plan and you have already attempted to show it to someone
So you have a great business plan and you are not yet fully disappointed after the message “Show your first sales. We have to be sure that your idea will work …”
Now, this is your toughest time. You have already invested a significant amount of your time, so, do not lose your enthusiasm after a number of unsuccessful pitches to investors.
At this point, you need to:
- Update your business plan;
- Prepare its promotional material (presentation, infographics, blog post, article);
- Prepare a long-list of potential investors and intermediaries (VCs, business angels, incubators, accelerators, friends);
- Outline and start your promotional campaign;
- Develop a prototype product.
The pressure grows, but you still can go through by bartering and using your communication skills.
If not, begin to create a conglomerate of people who will help your project survive. You do not need to share 50% of the value of your project, but be ready to give a 20% share of your future business.
As for me, among the above-listed, the only thing that I would not be able to do myself is to develop a prototype. In this case, I would opt for a barter option or the effective buying of a prototype.
Not a professional buyer? Then you should learn to look for the best deals on the market and make the right choice. Gather up the maximum amount of advice from different sources, and you will definitely save 30-40% on the average price in the case of a small sample size, if you are in a hurry.
Frankly, I passed this stage and did a web application of a B2B service with an adapted mobile interface for $1,000. In my particular case, I bought a template on the WordPress website, made a few piles of specifications and guidelines myself, and engaged a freelance frontend professional and designer.
When it comes to real project expenses, try to avoid continuous expenses, including the hiring of personnel. The ideal formula, in my opinion, is to pay a lump amount for work only when it is done and meets the pre-agreed quality criteria.
And remember, penny wise and pound foolish…
By Sergey Atamas, Managing partner of Kreston GCG