Many of today's new entrepreneurs have no choice but to keep costs low. Working from home offers the lowest possible overhead, while tapping friends for resources helps you better spend your own time. Using independent contractors saves money on benefits and taxes, while new technology -- such as Facebook -- offers cost-effective marketing.
Starting a business can be expensive, as people find when they become entrepreneurs after losing their jobs. But many of these brand-new company owners have also found ways to keep those costs down.
The biggest money saver is working out of your home. Asking friends and family to refer good but low-cost help, from accountants to graphic artists to lawyers, is another way.
Keeping startup costs down is essential when a business is young and money isn't yet flowing in. But always watching your expenses and being sure they don't get out of hand is a good way to help any company weather the downturns.
"We didn't have a choice" but to keep costs low, said Michael Volpatt, co-owner of the public relations firm Larkin/Volpatt Communications. "What I've learned in the last 10 years is that financial stability is about sustainability." And that, Volpatt said, means making sure a business isn't ever undermined by costs.
Here's a look at ways that new entrepreneurs can keep their startup costs down:
Work at Home, or in a Friend's Space
Since many people who have lost their jobs tend to be at home, that's where they start their businesses. They can't beat the low overhead.
When Volpatt and Kate Larkin started the public relations firm Larkin/Volpatt Communications 10 years ago, they both worked out of their homes. Volpatt is based in Sonoma, Calif., while Larkin is in New York.
"It made sense financially," Volpatt said.
Working at home requires some adjustments. A new entrepreneur needs to have space for an office. If there are children and pets around, it's easy to be distracted. Some people find it isolating to be home much of the time.
There can be a financial plus in working out of your home besides keeping costs down. The federal tax code allows people with home-based businesses to deduct some of their expenses such as rent or mortgage interest, utilities and repairs.
But you may have to spend more on insurance. If a fire damaged your business equipment, or a business associate was injured at your home, your homeowners policy might not cover it.
Another option, if you don't want to or can't work out of your home, is to find very affordable space. Do you have family or friends who are willing to rent to you? Jill Donenfeld, CEO of The Dish's Dish, a personal chef service with offices in New York and Malibu, Calif., started out four years ago in space behind a friend's Greenwich Village hardware store. Donenfeld, who had $4,000 to start her company, paid $100 a month for the space.
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