8 Start-Up Financial Tips to Kickstart Your New Downsizing Business

New business owners have a lot to juggle in their first year, so it’s important that they get the best financial tips that can save them from making costly pricing or financial decisions.

Probably the lowest on the fun-meter, in starting and operating a new business, is dealing with finances. But, it should be among the priority items at the top of your list, especially before you jump into the setup and launch phases of a downsizing (or any) business.

Why? Because finances, if not properly planned for, are at among the highest reasons businesses fail. Since we certainly don’t want that for you, let’s address them so you can feel more confident moving forward.

How much money do I need to start my business?

One of the biggest questions business newbies ask is “how much money does it take to start a business?”. 

It’s a valid, but complicated question.  There are a lot of variables in start-up costs, including the size of your business, the number of employee’s you’re planning on hiring and the type of services you’ll be providing.

For instance, are you planning on including moving as a core service?  If so, you’ll have a much higher upfront cost expense in purchasing a moving truck, obtaining special mover licensing, higher insurance costs, etc.

If you’re planning on scaling your business right out of the gate to a larger, multi-team downsizing business, then you’re going to have to plan for higher wages, vehicles for material transport, larger office space, and staff for operations, etc.

However, many senior downsizing businesses are successfully started on a relatively low budget.  Several factors contribute to this.

A smaller operation can be run out of a home office. Materials can be stored in a garage or storage unit and a single work van, SUV, or truck for materials transport. 

Let’s assume you’re going to start your business on a smaller business scale. You want to manage things from a home office, keep your business structure simple at first, and want to understand some ways you can protect it and make it more efficient.

8 Tips to Help You Financially Plan More Effectively

Here are the 8 financial tips that will help you plan more effectively and proactively so you can lower your start-up costs as you build your business.

Financial Tip #1 -Test the market.

One of the things I go into quite a bit of detail on in my Senior Downsizing Specialist training program is how to test your market.  This includes finding your competition and they are charging for comparable services. It’s also important to know what your competition excels at and what they don’t, so you can find service opportunities that aren’t being met.

Having a clear picture of where your financial opportunities are before you launch is critical. It tells you where to advertise, who to start calling on and how to best position your business services against the competition.   

Financial Tip #2 – Create a budget.

Most people get glaze-eyed when they are faced with creating a budget, but it’s not difficult.  I include a budget template worksheet in my program, but you can also research templates at score.com or other business support organizations. 

First, separate your ongoing business operations expenses (like internet fees, office supplies, utilities, phone, etc.) from your start-up marketing expenses (brochure, business cards, website, etc.), many of which are one-time or infrequent costs. 

Include your personal living expenses as another component because, unless you have another job or income stream that pays for them separately. Keep track of what you need to cover in living expenses for the first 6 months up to a year so you can plan appropriately.

The reality is that starting a business takes time to build a client base that can sustain its monthly costs, plus an owner’s salary.

Financial Tip #3 – Have a solid pricing strategy.

It’s critical to have a solid pricing strategy when you open your doors for business.  Creating value in your services is a work in progress, but coming out of the gate too high or too low can create frustration or have significant financial consequences. 

Too high a rate means you lose potential customers to your competition. Too low a rate can mean you’re working twice as hard unnecessarily just to make a decent living. Believe me, that gets old quickly.  

I made that mistake when I started my business! It’s why I spend a considerable amount of time on the subject of pricing strategies in my training program because you need to know which strategies work best in our industry and which ones to avoid.

Once you are out in the world giving estimates, it’s important not to underestimate your bids.  It’s better to err coming in slightly higher than the actual cost than too low. Customers tend to consider an estimate as a worst-case scenario, even when it’s not, and they hate surprises at the end of a move when they are tired and lacking patience.  

As the motto goes,  “it’s better to under-promise and over-deliver than the opposite”. It’s a good motto to start with while you are getting a feel for the amount of time and materials you’re using. You can always fine-tune from there.

Financial Tip #4 – Keep your initial investment small.

Sometimes, in the excitement of starting a business, we’re tempted to buy all the gadgets and shiny objects we can to show our customers we’re at the top of our game.

But, shiny objects don’t build a reputation for a long-term business.  Instead, save your investment cash for the long haul and only buy what you absolutely need to be professional and provide quality service. 

Maybe you buy a used vehicle or use an existing vehicle as you start out and then, as your business grows, get a larger, better vehicle in your second year.

Stick with an existing desktop computer and hold off getting a more mobile laptop or tablet later.  There are plenty of ways to keep things simple. Essentially, this business doesn’t require a lot of equipment or specialty items to operate professionally.  So, put your money into the “must-have’s” first, instead of the “want” category, if your budget is super tight.

Financial Tip #5 – Understand the different types of business costs.

Sometimes you feel like your head will explode when you think about all the details required to run a business.  But, when you’re clear about the different types of costs you’ll be paying for, you’ll reap the benefits long-term.

As I mentioned before, there will be one-time costs and ongoing costs.

Starting a business means creating marketing materials, including a logo, a website, business cards, and a brochure. These are costs that are either one-time or infrequent, with the website being the largest.

Examples of ongoing costs are your monthly operational fees like vehicle gas, packing supplies, office utilities, and phone and labor.

Some of those costs will be fixed. That’s great for budgets because you know they won’t vary from month to month. 

Variable costs change from month to month. You should have a portion of your budget include funds for “surprises” when, or if, a variable cost spikes.  An example would be an extra-large move that requires a lot of expensive specialty boxes and more labor than normal.

Financial Tip #6 – Include overhead costs into your labor and service fees.

Overhead is the “invisible” cost that many people forget to include when working on their pricing strategy.  Overhead is the cumulative cost of everything you pay to keep the business running.  It’s things like gas, tires, or other ongoing maintenance for your vehicle.  It’s also the cost to maintain an office like utilities, phone, and rent if you lease a space. 

When determining your pricing structure take into account the “cost” of labor (like workman compensation insurance and self-employment tax). Don’t forget to pay yourself!  You’re in this to make a living, not do it for free!  If you structure your business on an hourly fee plus materials, these costs are pretty straightforward. 

Once you do your first year’s budget, estimate the average overhead costs that you need to cover. Then add your profit margin to make sure you’re charging enough to sustain your business.

Financial Tip #7 – Try to start your business without taking on credit.

Financial advisors recommend that, if possible, try to start your business without getting into major credit debt in the process.

The problem with using credit is that it adds significantly to your overhead costs. That accrued interest you pay each month really adds up.

It’s a good idea to have some form of line of credit at the ready in cases of emergency though.  For instance, you may need it when a client hasn’t paid you yet and you need to purchase packing materials for the next move.

Drawing from other investment sources, or savings, to get your business essentials will lower your cost basis and improve your profit margin your first year.

Financial Tip #8 – Look beyond your bank account for financing opportunities.

Because small business is the backbone of our national economy, there are tons of financial grants, loans, or other creative financial opportunities available today than ever before.

Many of these business financial sources offer loans or grants that specifically benefit veterans, women, minorities, or rural communities. Many grants don’t have to be paid back.

The COVID crisis of 2020 created even more government-backed financial resources for small businesses to encourage growth throughout the United States.  So, get on that computer and start googling financial grant resources!  There are plenty of them out there!

Try business support organizations like Score.org, the Small Business Administration. You can also look for Small Business Development Centers in your community to get more information.

You’re in charge of your financial future!

Each, and every, one of these financial tips will if implemented help you steer your business toward long-term success. 

You don’t have to be a financial wizard to make a business thrive. Just stay on top of your financial status to make sure you are on the right track.

Here’s even better news! If you’re feeling a bit overwhelmed about starting your downsizing business, you don’t have to do it alone! 

Invest in your business! Get the training and the foundation you need to fast-track your start-up. You can start earning income faster by joining us for training at The Downsizing Institute! 

It’s everything you need to start a senior downsizing business while saving your time, energy, and stress!