Navigating High-Initial Costs: How to Manage Upfront Investments

It’s been more than a month since I posted, and far too long since my starting a business series of entries. Let’s circle-back (office jargon) to that idea with some new posts.

Starting a business with high upfront costs can feel overwhelming, but with the right strategies, you can navigate these challenges and set yourself up for long-term success. Aquamation is a business with what feels like a monumental cost of entry from the price of the technology to finding a space. Many businesses, across a spectrum of industries, face significant initial investments in equipment, space, and materials. Here are some practical ways to manage those costs.

Prioritize Essential Purchases

When starting a business, it’s important to prioritize the purchases that will have the greatest impact on your operations. Instead of buying everything at once, focus on what you need to get your business running smoothly. For example, leasing equipment or opting for second-hand tools can help lower initial expenses while still providing the functionality you need to serve customers (Henderson, 2019). This also aligns with knowing your own skills, as there are plenty of cost-saving things you CAN do when you know your abilities and limitations.

Explore Financing Options

Many entrepreneurs turn to loans or grants to help manage high initial costs. Small business loans, particularly those backed by the U.S. Small Business Administration (SBA) and in the case of Eternal Tides, the Economic Development Administration (EDA), offer favorable terms for new businesses (SBA, 2020); these do fluctuate depending on when you seek them. Another option is finding investors or business partners who can help share the financial burden. Crowdfunding can also be an option, allowing you to gather funds from people who believe in your mission. However, it’s wise to plan on 10-25% investment of your own money to get going.

Leverage Your Space Efficiently

Your business location is likely one of your biggest expenses, so it’s important to choose wisely. Consider co-working spaces or shared facilities to reduce overhead, and ensure your space is used effectively to support your business model (DePillis, 2017). Additionally, evaluating your space’s layout and maximizing its usage in alignment with your needs can help you avoid expensive expansions and fit-up costs. Nowhere will be “perfect,” but patience and wisdom can help find something that will work for your needs.

Starting a business with high initial costs can be challenging, but with careful planning and resource management, you can successfully navigate these hurdles and set your business on a path to growth.

References

DePillis, L. (2017). The cost of a commercial space in America’s cities. The Washington Post. https://www.washingtonpost.com

Henderson, M. (2019). How to manage high startup costs: Practical tips for entrepreneurs. Entrepreneur. https://www.entrepreneur.com

U.S. Small Business Administration (SBA). (2020). SBA loans for startups and small businesses. https://www.sba.gov