2 Ways to Reduce Upfront Expenses for Business Startups

Starting up a business is one of the most challenging yet most rewarding decisions you’ll make. The process can be long and demanding. But doing the budget allocation is an entire task on its own and it can get overwhelming and taxing at times.

For the most part, allocating a budget for upfront expenses requires plenty of work as money invested in this area will help run the business but does not generate income. This is true for equipment and technology.

For startups, capital money is crucial as this is will be the funding source for the next 3 to 6 months, or even for a full year. With that said, here are two ways to help you reduce your upfront expenses and preserve capital money.

Equipment Rental

If your business involves warehousing, an industrial truck is considered a business necessity. However, before jumping the decision to acquire one, consider the frequency of its use and the total cost it entails to purchase, maintain, and operate it. Warehouse startups may benefit more from signing a long-term electric forklift rental contract than if they decide to buy one or more, for example.

There are many benefits and advantages to renting equipment. For starters, you can minimize your upfront investment and direct the funds towards income-generating purchases that will bring in Purchasing capital equipment means your money is tied to the investment until such time you sell it. However, by the time you do so, its value will have depreciated and you’ll only make a portion of your initial investment back.

The rental cost includes maintenance fees and covers a portion of the fuel expense. What’s good about this option is that it takes the maintenance work off your plate and the equipment gets serviced on a regular basis.

Likewise, you can simply call the rental company and schedule an inspection when the need arises. It’s a more convenient way of having the equipment that you need, with less than half the worries of owning one.

Aside from that, you can easily upgrade your equipment when a more efficient model arrives. Shifting to a newer model isn’t as easy to do when you own the equipment. Instead, you’re likely to use it until it bogs down or wait until it’s sold to generate funds for the acquisition of a new model.

Renting eliminates these constraints and allows you to take advantage of the latest equipment, as soon as it’s available. Often, rental companies allow an upgrade mid-contract and re-calculate the cost and duration for the new agreement. This setup gives businesses more flexibility when it comes to upgrading, downsizing, or expanding their equipment when and where it is needed.

Renting is the more economical choice, especially in cases where equipment is needed less than 50% of the time when equipment is needed temporarily to fulfill the additional workload or to fill in during an outage.

Outsource IT and Human Resources Tasks

human resources concept

Another investment a small business needs to work on is establishing its internal teams for front end and back end operations.

The front end teams include customer-facing teams and those who take care of post sales customer service. Back end teams on the other end include IT and Human Resources.

Not all businesses have access to large funds to help them establish their own internal teams from the get-go. However, to run the business, there needs to be technology in place and a skilled workforce to operate it. The same is true for payroll, employee management, and employee engagement.

In this case, outsourcing provides the best solution for startups and allows them to build an efficient work environment sans high upfront expenses. The contracts can be customized, depending on the nature and need of the business. Two of the most common services that startup outsources are IT and Human Resources.

IT companies offer a full range of IT setup and services, while HR companies offer operational support and management to suit your needs. It makes it much easier for the business to scale their technology and increase their employee headcount, when the need arises.

That said, renting and outsourcing allow a business to augment its fleet and get the assistance of a reliable skilled workforce when where they need it and where they need it.

It also makes it possible to run the business without tying large money down to  equipment and maintenance cost, giving owners the ability to direct the funds towards income-generating investments and pool funds that can be used to diversify their business in the long run.

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