Through The Marketing Lens

How Much Do You Need To Spend To Start A Business?

November 10, 2020 Katrina Aronson Episode 9
Through The Marketing Lens
How Much Do You Need To Spend To Start A Business?
Show Notes Transcript

Starting and growing a business is scary without a plan. Understanding your monetary expenses upfront so you understand where to actually spend money and where to save is a huge advantage.
Many businesses FAIL because they do not have enough cashflow. I am going to tell you some of the secrets of starting a business and how I learned to save money so my business could carry enough money to thrive.

You will learn:

  • Where you need to spend money in the beginning, like on creating your LLC with a lawyer vs. DIY
  • Do you need insurance? Is it worth it?
  • What technology do you actually need?
  • Getting past your ego and approval of others and how to check yourself there when it comes to spending money 
  • Branding and website costs -- are they really worth it? 

Upfront costs are not all black and white. Let's talk about the grey space of spending money for your business. I am hitting some of the "obvious" questions that I get or have had myself so you can get clarity.

Connect with me:
www.katrinaaronson.com 

www.instagram.com/katrinaaronson_consulting

Sites I mention in the episode:

Fiverr - use this for website designer that is less expensive 

Links:

Hello there and welcome to today's episode Through The Marketing Lens. Today we'll be talking about something that is relevant to pretty much every business, and that is, it takes money.

This is something we've all heard a million times. And it's absolutely true. But I'm really going to talk about the mistakes that I've made and what I've seen other entrepreneurs making in their business when it comes to spending money. How much money do you actually need to spend? Well I can't answer that, but I will tell you the truth about how this part works, and hopefully, it will resonate with you so that you can make the best decision for yourself and for your business. So I do not take on investors for various reasons, and I've absolutely felt the pain of a lot of money and spending in my businesses. And there's build-outs, and inventory and insurance, and there's a lot of areas that are black and white. And then there's a lot of areas that are not so black and white. And that's where I'm gonna spend a lot of time today, those gray areas where we're not sure of the weights, and how much we should be spending in those areas. A lot of businesses fail because they don't have the cash flow to carry them for the long term. And I'm going to tell you something scary, half of small businesses, only have a large enough cash buffer to carry them for about 27 days, if they stopped bringing in money, That's crazy considering what we've all been experiencing recently with code.

I'm not saying this to panic you but rather, I want every small business owner out there who's listening to realize how smart we have to be as small business owners, And if we're spending willy nilly without a plan. It will be your downfall eventually. So I'm going to dive into a few areas that can be expensive and share my experiences so that you can make the best decision for you.

So number one, I'm going to focus on your physical space, it doesn't matter if you're online, it doesn't matter if you're brick and mortar. This is important because, at some point, you might ask yourself Do you want an office space do you want to work outside the home?

If you're brick and mortar, it's an obvious choice you have to have the physical space. And a lot of these things depend on your life, right, like how, how big of a space you need but for anyone who's online. Think about co-working, that is so easy to do right now and they're popping up all over the place. I know it has to be COVID safe but focus on something where you're going to be saving money and you can always grow from there. So, brick and mortar a big cost is your rent, and your build-out, and I want to share a little insider secret, and that is, you can often ask for a landlord to pay 100% of your build-out or certainly a portion of your build-out or give you an allowance. It's always negotiable. This is essentially built into your lease.

But as an entrepreneur who's just getting started, it's a great way to delay the upfront costs and pay them over a period of years.

Okay, so now I'm moving on to the upfront back-end costs like forming the LLC, and getting insurance and those things so those are non-negotiable.

but whether or not you opt to go with a lawyer, or go down a DIY path that can change the costs of doing those things. Either is fine, but you do need to do it right, and make sure that you have it done right, certainly in terms of liability.

A legal Zoom is a great option, that kind of marries both worlds. But if you having a brick and mortar, and you are in a space that will have liability. I would highly highly recommend going with a lawyer. Yes, it's a little bit more upfront but this is something you're going to help yourself down the line, God forbid, something was to happen. I have really really good insurance, and we had a flood, a couple of days before we opened my brick-and-mortar boutique. And it was devastating, but the insurance paid for 100% of everything that happened. And we also had business continuation insurance which I highly recommend as well. And that allowed me to get money for the days that we would have been open. So, all these things, you know, you might feel like you're saving money upfront by not doing them the right way but, you know, it's always good as a business owner to take into account that things happen and just have no idea what can happen down the pike, so do the best thing that feels right in your gut, for you and spend a little bit more money than maybe feels comfortable upfront on those things that you will get back if something was to happen.

So now moving on to something that I feel really passionate about and that is your branding and your websites. This is important for absolutely every single type of business, and especially right now when we're living in such a digital world, you have to have good branding and good websites. This is a true upfront cost. That is absolutely necessary for your long-term success. You don't need to spend 1000s and 1000s of dollars if that's not in your budget. But then you do need to do the work yourself. I built my first website myself. I don't recommend doing that to someone who's not technologically savvy, but you can learn a platform, and do the work right, it depends on what your life looks like, but I learned Wix, and I really like Wix. Wix, Squarespace, and show it is pretty user-friendly when it comes to websites.

And along with your website, you need to be spending a little bit on your branding, and by that, I mean your visual branding because that's what the whole world is going to see and take, so that's your logo and your color palette and your overall feel, do you have a couple of options there. You can spend money, working with a graphic designer, that will help you to really understand your business better. And this takes the work off of your plates, and connecting those pieces together, and creating your vision. You can also hop over to a site like Fiverr If you don't have the budget for that you'll be working with people all over the world and essentially bidding out your job. This is a lot less of personal touch. And a lot of the conversations will be happening through message, but it's a lot less expensive and you can find great gems. So, do the research there. Don't skimp on this part, having a website that converts is really really important. But you have to be honest with yourself, if you can't afford to hire your dream graphic designer, don't spend all your money on this, do more research, talk to more people hire a business coach that can help you with these kinds of things. This is really only one component of your business and I don't know what your budget is, which is why I can't give you a straight answer. But you have to treat it as only one component that's really important, so it has to weigh a little bit higher on your list than maybe some of the other things, but don't spend all your money or whatever area. where I feel really passionate about is obviously your merch.

If you're living in the world, I will build it and people will just come. You're not living on the same planet as anyone else around me. You have to spend money on marketing, eventually, especially now we live in such a saturated world, and we have to stand out so how do we do that. Well, here's the really good news being a newbie, you can make a lot of buzz around what you're doing pretty much for free, and you have a lot of opportunities to ride that wave. For that, that buzz period which I've seen last you know about six months to use all those free opportunities to promote your business before you start painting, but once you're no longer the new kid in town or someone else pops up that's newer than you, Then you're going to need to get comfortable spending money on your marketing, and you're going to learn a ton about what's actually working for you. And those are the areas where you should invest with marketing, you can really get a lot back when you are spending, But you do you have to be really smart. It doesn't mean spending 100% of your marketing budget on Facebook ads and then seeing what happens right I want you to spend areas that make sense for you. Maybe you've seen some feedback from those areas, but not spending 100% of everything, in one area.

So, to recap that, find the few ways that are free to market yourself really well over the first six months when you're still the new kid in town. And yeah, that does mean still having a strategy but doesn't mean having a paid one. And then I want you to consider starting to pay, and start small and then grow from there.

Okay so now I want to move on to something we all need to have as business owners and that's technology. So at this point, I'm gonna talk about computers and phones and the things that we use every single day.

So I'm using  Macbook air for my business. And it's not the biggest one I don't even know what it is probably 15 inches, and I have an iPhone 11 Now, I love Mac's because they last forever, and they don't get bugs really and I trust them. I know them. And in my business, I need to have a really good computer. So you don't need to have the biggest screen back, or whatever it is for you to run a good business, I promise. You don't need to have the newest phone all the time. I think people just really get caught up in all of that stuff, and what it represents, whether it's to them or to someone else, and I do get that, but it's a waste of money. And if you're not a graphic designer or an interior designer. Why do you need those things? What do you actually need to function well? And what's going to be reliable, and then kind of stop there and stop letting your ego, take over. I do realize that you know, sometimes it's about the image, but your image isn't going to matter if you don't have enough cash flow to stay open and those are really expensive things so I just want you to check yourself constantly. Photography, that's the next area that I'm going to be jumping into okay so we're living in a visual age. An age of social media and people taking in information constantly. And like we said before, you have seconds to capture the attention of people who are really busy platforms. Most of the time, and hopefully get them over to your website or there would be even more of your photography.

So, having really good photos is really important, and having someone take those pictures for you on an iPhone while yes, it's totally doable and people might disagree with me and say you know you can totally take them yourself and edit them. I just think a professional photographer is always worth it 100% of the time, but finding a photographer who's willing to work with you is really important. You guys I've spent so many 1000s of dollars on photography in my businesses, and I didn't take the time to negotiate in my early days, and that was a mistake. If you're hiring a photographer consistently, they should absolutely be willing to at least talk and negotiate with you, and perhaps pay a reduced rate. If you hire them for let's say 30-minute sessions instead of doing hour-long. This is all fair, and this is all business, you don't need to pay every month to have a photographer come and have them on retainer and all of that stuff. Not every photographer will negotiate and that's okay, but finding the ones that work with you, is really important, and putting time into that relationship is worth it because you're going to be using a platter all the time. Okay, so for my business I will tell you my brick and mortar I had someone who was wonderful. She was amazing, but I didn't negotiate with her as I mentioned, and I had her coming for probably like once every month, four-hour-long sessions. I absolutely could have reduced her time and I could have done that by having shortlists for her. Rather than thinking about it when she was actually there which was on me and my business now, which I do much, much better In terms of planning with my photographer, so I will have a shortlist for her, we get together for big shoots probably every six months, I would say, but I do have stuff scattered in between, but those are shorter sessions. So having that kind of planned out in your head. I know when we do these big six months sessions, I'm going to get a ton of pictures from it. So I plan those out really really well, a bunch of outfits because they tend to be pictures of me or my family, or, you know that's what my content looks like. So having that list together of having a photographer that you trust you guys is stuff that will pay off. And like I said negotiating will also help with that.

Alright, so I want to talk about a mistake that I made a pretty big one. Early on in my business and that was traditional advertising.

I want you to hear me when I say this, it doesn't mean that advertising is not worth it. I absolutely think advertising is awesome, but additional advertising that you cannot track is really hard to commit to in the beginning, and honestly maybe ever at this point. Yes, it gives you credibility, but a $5,000 ad in a magazine is eight months of advertising on Facebook at $20 a day, and the $20 day on Facebook is going to be really effective, because it's over time, and now Facebook is connected to Instagram right so I've done this before I spent the $5,000 on an ad and I was about two years into my business. I did have the cash flow to make that decision, but I will tell you I wouldn't do it again because I couldn't track it and there was an online component, but it was really being in the magazine that I was after. And if I checked myself now, I realized that it was probably more for me than it was for anything else. And what I would say about that is, it doesn't mean you shouldn't do some of those things later in the game. And some of that stuff is, is press and I get that, but I want you to focus on the things that you can track, probably always but certainly in the beginning.

So, the truth is, like I said before, It takes money to make money, but it doesn't take all the money you have, and I want you to stop worrying about how anyone else does it, staying true to your budgets, which no one else has the same budget right, staying true to your budget and your business and yourself is the best way to steer clear of these mistakes, and when I hear people saying that they bought the biggest Mac for their studio or for their storefront. I do wonder who they're buying it for just like myself with the magazine, who was I really buying that ad for.

So while image matters. Your bottom line is going to matter a lot more in year two or three when you don't have the cash flow.

Some businesses I work with now that I see are growing leaps and bounds and taking in a lot of cash, they're still really really smart, with how they're spending it because it doesn't mean that you should be spending all of your profit on all of these things right you want to be really smart and strategic when you're spending those dollars in my one on one coaching, we spend a ton of time talking about profits, and how to really grow those profits. And I'm hyper-focused on marketing and profits in business because those are the two main drivers to a successful business. Once you have your foundation and your offerings down pat. Okay, so with that, I would love to hear if this episode is helpful for you, please, please take a moment to review and rate this podcast, that's how these little engines grow. I am super duper excited to announce a couple of big things happening in my business soon, hopefully, a chance to work with a lot more of you. Thank you so much for trusting me with your time, I will keep showing up for you every Tuesday.