Finding funding for a start-up is never simple. If you’ve had no luck so far however, it doesn’t mean your idea isn’t a winner. It just means you need to pull up your laces and build it from the ground up with your own hard work. It’s not going to be easy, and it’ll take you longer to start drawing a salary, but for social entrepreneurs that’s not always the main goal anyway, right? Here are our tips for starting a social enterprise on a budget.
The first step is finding the right mindset. If you’re not in a position to pitch for funding, or have already tried, you need to view your idea as a labour of love. Work on it at weekends, building up contacts, setting everything in place and building out a marketing plan for when it’s time to strike out on your own. Get up an hour earlier each day to work on your idea without distractions. For now, the reward is the satisfaction of creating something, helping effect change. If you’re employed elsewhere, take extra care to make sure you’re not violating any clause in your contract, or using your employer’s equipment to work on your social enterprise.
Costs can quickly amount if your work requires you to travel frequently – especially by car. Look at ways to save. Make Skype video calls if you can, or if you’re travelling around within a city, buy or hire a bike. It’s also possible that despite high upfront costs, travelling around by ride hire services could be cheaper than using your own car for work, so do the napkin math to see if it makes sense for your socent.
Likewise, offices are hugely expensive – rent is high and that’s before you factor in the cost of getting there and back every day (Remember also that in some countries, if you are based at home you can reclaim part of your home utilities in your tax return).
If you’re starting your social enterprise on the back of your savings, be very cautious of hiring staff straight away, for one reason: employees cost much more than their basic salary. Factor in holiday cover, equipment, software licences, benefits and other costs that laws in your country may oblige you to incur (pensions, for instance) and you could easily be looking at double the base salary or more. Try to create a source of revenue generation before expanding in this way, whether that’s a client, a contract or a product you’re able to sell.
Of course, you don’t have to go it completely alone. If you have friends or partners who are as dedicated as you are, you can work together as co-founders for the same goals and rewards. Just be aware of all the costs (and legal issues) that hiring employees can create. Of course, there may well come a time when you recognise that the extra person-power staff supply will enable you to grow more rapidly – you might just need a bit of time getting there first. Consider hiring at first on short term contracts, or employing freelancers you trust until the time comes for you to make hires of your own.
Watch out for overheads
Just as staff can cost more than you would expect, so do other areas of entrepreneurship that you may not yet realise. Monthly subscriptions for software, forms of insurance, professional services; they all add up. Before trying to bootstrap your business, be sure to factor these all into your costs, then look to see where you can save. Establish what is required by law in the territory you live in; many countries require annual audits of accounts which means hiring accountants, while it may be necessary to use a lawyer to incorporate your business correctly and navigate limited liability laws. These professions often charge by the hour, and you’ll need to prepare for that.
Don’t skirt corners, especially when it comes to professional services, but do look to see where savings could be made by advances in online cloud software. For instance, are there free versions of (reputable) email and cloud storage services, or accounting software, that you can make use of for the time being? Accounting services such as Officewise and Smarty have a freemium tier, as does Expensify for business receipt and Avaza for project management, invoicing and timesheets.These could save you a bundle, especially if you only use them at a level that doesn’t require you to upgrade beyond a free account.
You may be planning to operate on a shoestring, but that still means you need to budget for a worst case scenario, all the time. Add healthy buffers into all your calculations to give yourself some breathing room. The one thing you can be sure of in life is that you can’t be sure of anything, after all. Suppliers will flake out on you, messages and parcels will get lost, your circumstances will change. Likewise, if you’re selling a product or service, work out how your finances will look if it doesn’t take off quite like you imagined – if you committed to make a donation in kind to a charity for every item sold, for instance, at what point would that no longer be economically possible for you? Know all this and then when things turn out better thanks to your hard work, you’ll be pleasantly surprised.
Lastly, pitch for confidence, not cash
You may not be seeking financial backers, or perhaps you’ve tried already and they’re not buying. Regardless, you will have to win buy in from a very important set of investors; emotionally, from your friends and family. If you’re starting out with little in your back pocket, it’s crucial that you win the support of those around you. They’ll need preparation for what’s coming, just like you – uncertainty – and there will be challenges ahead, so finding that backing from the people you love and trust is crucial, or your uphill battle will be even steeper. Take the time to walk them through your plans: show them, don’t merely tell them, why they matter to you and how you believe you can make them work.
Do this and you can fully concentrate on the task at hand: creating a worthwhile social enterprise that can make a difference.