It’s Smart to Stay Scrappy

I want to talk today about the importance of staying scrappy as you start to build a tiny business. What do I mean by staying scrappy? I mean, keeping your overhead low and your costs down. Why do I recommend this? Because the number one thing that puts businesses, especially tiny businesses with five or fewer employees, out of business is lack of cash flow.

Unfortunately for most businesses, including the tiny one, it can take up to two years to start really making the amount of money that you need to be making a healthy profit and a great living off of your business. Yet the trend that seems to happen with a lot of people when they start a business is that they start thinking of that horrible saying, you have to spend money to make money, and they end up going into major debt in order to have this business.

Sure. There are times when you may have to take out a bank loan or a friends and family loan, or rely on money funding outside of your own, your savings perhaps, or something like that. But those situations should be very specific such as perhaps if you need to have a brick-and-mortar space. Or if you are opening a food truck and you need to get that food truck. If you need to make an initial investment in equipment or if you need something that without that you can’t have a business.

What I’m talking about is that when you start a tiny business and it is just you doing something, for you to try and keep as low of an overhead as possible. That you keep those monthly and annual costs low for as long as you can. Why? Because it will give you a healthy cash flow. This will help you also use the limited resources you have for the first couple of years for the things that you really are going to need to invest in. And you may not know what that is yet.

If right off the bat, you start with very expensive monthly subscriptions to software and office space and furniture rental, and a lot of equipment you don’t need. It’s going to make it so that when you do need money for things to grow and to invest in, the money won’t be there. It will be tied up and leave you with little cashflow, which could end up quickly putting you out of business.

What exactly do I mean by stay scrappy? Well, I mean for you to use the free Canva until you are yelling at Canva muti[le times a day that you need the things that require the paid version. And then finally, when you’re yelling all the time, you upgrade. Stay DIY because in the beginning, time is on your side.

Now of course, every business is different. There are no two identical businesses and every business owner is different. This makes it, so there are a myriad of outcomes with how the input can result in different outcomes, right? There are a lot of different ways things can go. But what is similar with all businesses is that when we do start, we usually start from zero. Avoid putting a lot of money into it from day one if you can as you don’t always know the direction you’re going to go yet. There are lots of ways we can go.

There are lots of business models we could have. There’s a very different approach to running a business that is trying to have an advertising model, which means you have to have a large amount of traffic, a large number of followers, a large number of downloads, to prove value to your advertisers versus somebody who enters the service business and only needs to have a handful of clients to be quite successful.

Those are two different things. You need two different outcomes. One may require a Facebook ad running every single week. One may require no online presence at all. So it really depends on the type of business that you need of where to be putting money out. So if you start from the beginning with throwing money all over the place and into everything, you may not be putting it in the right area. But if you begin by staying scrappy and by using that free version of the software, until you determine how much you actually use it, if you wait to get a big fancy office, so you have absolutely grown out of your current space. If you wait to hire people and you learn the tasks that have to be done. So when you do hire people, you can teach them how to be the most effective and efficient and help your business grow. All of these things will benefit you.

I encourage you that if you are starting out, or if you’re about to start out, if you have a tiny business, stay scrappy for as long as possible. There may be areas where you need to put more money in right now, but in those other areas, stay scrappy and prioritize what is important. And for the things that are not on the top of the priority list, do not upgrade until it is absolutely a necessity.

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