The sad truth is that vast majority of all businesses fail before reaching the break-even point. As an entrepreneur, your number one objective should be to make it past the critical point where your start-up costs are less than the total money you’ve earned. Once you reach this point, you’ll have broken through an important psychological barrier in addition to having gotten very close to the phase where your business generates more than a typical “day job” would.
By this point, you will also have paid off most of your debts and proven your business model to be solid. And this can only make it much easier to attract investors and establish new bank loans.
The best way to shorten your journey to this all-important “break-even point” is by ruthlessly cutting costs. Not only does being cheap shorten your time to break even, but it will also maximize your profit margins.
There is a little-known cost reduction technique that is a closely-guarded secret amongst Silicon Valley venture capitalists. And I’m going to share it with you today.
In the early RN&D and start-up phases, your personally invested time or “sweat equity” will be your greatest controllable costs. Part of the reason that sweat equity is so expensive is that you must also pay your living costs while your company isn’t yet generating revenue.
If you can cut your living costs down to an absolute minimum, you can reduce the cost of your own sweat equity. And when taken into account, this will lead to faster productivity for your business.
Many start-up founders within the tech industry have discovered that they can reduce these costs by moving their teams to other countries such as Thailand, the Philippines, India or Argentina, where the living costs are much lower. You can easily live for a year in Argentina with the same funds that could sustain you for a year in San Francisco.
Also, the cheaper labour in these areas will allow you to hire personal assistants and housekeepers for very low rates. This would allow you to dedicate a larger portion of your day to the core business development activities of the company.
Of course, in order to do this, you’ll need the right technological tools. This means relying on private or public cloud productivity applications which can be accessed from anywhere and will allow you to collaborate with clients, partners and coworkers internationally. This is particularly important if you plan to rely on outsourcing or crowdsourcing.
In addition to this, living internationally will also provide you with lots of creative energy that comes with exposure to new cultures and new ways of thinking. These new experiences can only help expand your vision and stimulate new ideas.
If you’re starting a new business but having trouble attracting the start-up ir seed cash that you need, you may want to consider living abroad during your start up phase in order to reduce costs early on. And if you make this part of your business plan, investors will likely be impressed with your frugalness and be more likely to provide the support you need.
About The Author: Enterprise Features is a leading business tech blog, covering all of the latest developments in the enterprise computing space.