Alongside death and taxes, the only other certainty in business is that starting a company costs money. Just how much, however, depends on the type of operation you’re willing to run.
My partner and I have always known that we didn’t want Wonky to be owned by anyone else, or have to worry about repaying loans, and so we started out with pretty much whatever was in our pockets. It meant we’ve had to be highly thrifty. Thrifty is a confusing word – it doesn’t mean cheap, it means being careful with your money. If you’re cheap the chances are that you’ll end up making some false economies which will bite you on the backside later on.
There are plenty of luxuries you can do without in the early days, for instance a studio or office. We found that a coffee shop with Wi-Fi was perfect, up until we started generating enough income to justify renting our first space. The problem was, it wasn’t just rent that comes with a studio; it’s insurance, business rates, heating, electricity, line rental, internet… loo roll. Boy, does it get expensive!
Strange as it may sound, another in the ‘nice-to-have’ category was permanent staff. Although they cost more per day, employing freelancers allows you the flexibility of cutting them loose during the leaner times. We also lecture at local universities to spot upcoming talent, so we can offer them work experience placements to test them out on internal projects and then possibly smaller client briefs. Schemes like that are mutually beneficial, they get invaluable industry experience and we dramatically cut our costs.
While we were able to cut some corners initially, those nice-to-haves soon become must-haves. One moment we were fine and then we’d check our cash flow and get a shock. It taught us not to spend everything that was available and to keep a cash float for unexpected problems. At the same time, we never put off paying for things like insurance, security and legal advice as we knew they would save us money in the long term.
We found that out when somebody nipped into our upstairs window and stole our computer – at least we had contents insurance but we still had to pay the excess! It not only became much harder to find an insurer but it also got more expensive. Something as simple as buying window locks would have saved us a fortune! We’ve also found legal advice particularly handy for getting solid but flexible contracts in place. The other option, which can be more cost-effective, is to get standard industry contracts by joining member organisations such as PACT.
Another great place to save money long term is in the accounts. By having a good accountant who understands our position we’ve saved much more money than we’ve ever paid her – on things like tax savings and flat rate VAT schemes. To keep costs down even more we also opted to undertake the book keeping ourselves, just by using a simple spreadsheet – no fancy software required! As well as sparing us a few quid it meant that we were fully on top of our spending and understood every penny that came in and out.
Where we really struck gold was discovering all the things you can get for nothing. We were surprised by how many things really are free if you look in the right places, like funded learning schemes, competitions and grants through the likes of Skillset, Business Link or Creative England. I even managed to wing free trips to China, Mexico, France and Holland in the space of 12 months. Networking at free events and contributing to conferences can lead to all kinds of opportunities, trust me. We networked our way into Number 10 by year two and even bagged a new client in the Cabinet Room!
There have been some obvious basics that we’ve kicked ourselves for forgetting, occasionally. Experience has taught us to always set a fee with partners or freelancers once you do win that client as, weirdly, people tend to take longer than initially anticipated when you’re paying by the day. Who’d have thought!
- One Thing I Know