1. Top Story

Stretch Your Start-Up Money to Stay in the Running

By Nicole Jones

The dot-com era saw many start-ups run through money like a 100-meter dash only to collapse in the 2000 dot-com bust. Now that tech start-ups are once again booming across the country, online entrepreneurs have gotten smarter.

You, too, can pace your online business for a marathon ending in success rather than a sprint to financial doom. Here are some tips to make your initial funding last:

1. Hold off on the hiring spree.

Employment costs are usually the biggest part of a start-up's budget. Hire as few new full-time employees as possible. Save money by hiring freelancers to grow your company. Concentrate initial hiring in development to build a strong base for a successful business. Add to your marketing department after your plan and product are ready for the market.

2. There's no free lunch, but there is free software.

While your predecessors had to pay mega bucks for software, you can usually start very cheaply. Take advantage of inexpensive server systems, open-source programs or Web-based services to build and launch your products.

3. Get the most technology value for your dollar.

The cost of technology hardware has decreased significantly since the late 90s. But don't buy the cheapest solution just to save a buck. Think value for the dollar. Purchase enough hardware space and processor speed (or a system that allows for easy upgrades) to accommodate ever-multiplying software requirements and Internet data capabilities.

4. Set up shop in an incubator.

You can save money and get university support (think undergrad programmers) by setting up your start-up in a technology park. Contact your local government or universities to find one in your area. Or, consider sharing office space to save money. You can share printers, phone and Internet costs, fax machines and support staff like a receptionist or accountant.

If your storefront is Web-only, you can cut costs by doing your own cleaning and buying furniture from thrift stores.

5. Say hello to the virtual office.

In the beginning stages, some companies don't even need an office. Employees can work from home. Cheap online office scheduling managers keep everyone in touch.

But because there isn't daily, in-person accountability, it's important to set tangible goals to ensure work gets done. Also, plan to meet in person at least once a month to hash out ideas or outline progress and future goals.

6. Learn new tricks to getting your name out there.

Lavish launch parties and uber-expensive superbowl commercials are fun, but they are far from effective when you calculate the amount you spend just to get one customer. Here are some ideas for more cost-effective advertising:

• Co-produce newsletters or trade advertising spots with other businesses.
• Rent a prime address from business incubators or other organizations that offer you an address on Madison Avenue or Michigan Avenue for a monthly fee. This may get you respect from clients who otherwise wouldn't take you seriously.
• Save on advertising (TV, Web or radio) by buying in bulk or asking about last minute cancelled spots sold at a discount.
• Reward and inform loyal customers. Word of mouth is powerful, and if you give them new information and deals, they will enthusiastically spread the word to their friends.

7. Get the best interest rate on your cash reserves.

Make your money work for you. Short-term certificates of deposit and money market funds are safe ways to earn up to a 5 percent return. On $10 million, 5 percent is $500,000, which could keep you in business for an extra month.

Now you know how to stretch your start up money. But if you need to increase your monthly expenses by $100,000 to hire more developers for a project or buy more hardware to grow your company, do it. The point of venture capital is to grow your business. Marathoners need go a little slower in order to make it to the finish, but walking will leave you way behind.

Feature story provided by MidwestBusiness.com.

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