NFIB

Economize When Opening a New Business, Part II
03/ 07/ 2002

When you've finished your planning for opening a new business, secured financing, and are ready to begin purchasing/leasing equipment and office space -- stop! It's natural to want only the best (and most expensive) equipment, furniture, and marketing materials. But buying the best can bankrupt you even before you start, and even if you have plenty of money, cash flows of new businesses can fluctuate dramatically. In last week's Workshop, Jeffrey Moses discussed how to economize when leasing office space, and when purchasing office furnishings. In today's Workshop, he shows how to save when purchasing electronic equipment and marketing materials.

When reading through electronic equipment brochures and ads, it's hard to resist the temptation to buy the latest and hottest computer, phone, or copier systems. Who wouldn't want the fastest CPU, the largest storage capacity, or the copier with the most bells and whistles? But do you need the late stand greatest? Buying the most current equipment is going to cost you extra money when often you can buy the not-quite latest equipment and save a bundle.

For instance, a computer system with all the most up to date features may cost 40 percent more than a model that has been out for just 4-6 months with very little actual difference in speed, storage capacity, and other features. In fact, you may not even need what is offered in current models. So why spend the extra money? If your company is involved primarily in word processing, for example, you probably will never notice that you don't have state-of-the-art CPU speeds and storage capacities. If, however, you're involved in graphics, animation or use any of the current website content designing software, you might want to invest in the biggest and the best (and most expensive).

Smart shopping for equipment can save you more than you might think. Savings of 25-33 percent off retail are common. Shopping online is an efficient and cost-effective way to obtain just the right equipment for your level of needs, at a greatly reduced price. Another way to save is to purchase used equipment. Don't laugh! Refurbished or reconditioned equipment that is a year or two old can save you 75 percent or more, and probably will serve adequately through your company's start-up period and beyond. Obviously you need to be careful when purchasing used equipment. To be sure of what you're buying, see the former Workshop, "How to Safeguard Yourself When Buying Used Equipment."

Saving on marketing materials is largely a matter of smart comparisons in quality, quantity and placement. Follow these guidelines to economize:

1. Don't create the highest quality four-color brochure right off the bat. This can be prohibitively expensive, both in the price of printing and cost of designing. Instead, consider choosing more modest and less expensive one-or two-color brochures and flyers.

2. Good graphic designers can be expensive, but they often can make even a one-color brochure look good. Some print shops have graphics staff, and may offer reduced costs in conjunction with printing. If you hire an outside graphics specialist, offer to barter services, yours for theirs.

3. When advertising on TV or radio, don't spread yourself too thin. Target your exposure to one TV channel and one radio station to start with, then expand as business picks up. Remember, most TV and radio contracts are for a full year, so you'll be stuck with payments even if the advertising doesn't pull.

4. Don't expect a website alone to bring you large volumes of business, unless you accompany the site with adequate advertising (which costs up-front cash in most instances). If you want to design a site for your new business, start conservatively. Carefully scrutinize costs for design, hosting and maintenance. When working with web designers, tell them that you want to expand the site's scope and capacity as your business grows. They'll design the site flexibly so you can easily add on later.

Marketing is a necessary expense for most new businesses, and must be carefully considered when putting together initial budgets. There are ways to market at very low cost (please see the former Workshop "Marketing When Your Budget Is $0." ) For the most part, however, your marketing budget will be a significant part of your opening operating expenses.

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