How to start a business with £3,000*

I feel a bit premature writing this, as our business really is still such a baby

(we have a decent client, opportunities with a few of the ‘big boys’, we have just started drawing income, eight months after we started).

*and I should add, that’s £3,000 business capital, I still had to pay my living expenses for eight months – but it turned out to be much less than I’d anticipated.

I’d always imaged that to start a business you’d need a business loan/ venture capital/ a lovely nest egg. But so far we’ve done without it, here’s the specifics:

  • The day I lost my job I had about £5.5k in the bank, I was also given a total of £3k by the National Insurance Fund in Q4 2013 – upon the company I worked for going into liquidation
  • I live with my boyfriend
  • Our living expenses were based on the fact I’d take home £4,125 per month, alongside boyf’s £2,000 – our flat is over £1,800 per month, we lived a decent London lifestyle – our outgoings were approx. £5k per month

First thing – personal budgeting:

  • We worked out our actual financial needs:
    • Rent (£1,820 p/m)
    • Bills (gas, electricity, phones, Virgin media, water, council tax, insurance)
    • Travel (£120 per month x 2)
    • Food (£55 p/w – we always over spend on this)
    • Spending money (£100 p/w – this usually gets absorbed into food)
    • Forthcoming expenses: birthdays, weddings etc.
  • This came to £3,600 per month
    • We plotted it into Google doc, which we have used every month since July 2013
    • Once a week I update the Google doc with current figures
    • Every month we get to week 2.5, I think we’re doing really well, then in wks 3-4 we ruin it, only just coming in on budget
  • Bits and pieces of cash (birthdays, Christmas etc.) went into the fund
  • I opened a second bank account
    1. Current account – the £3,600 we need for that month
    2. Savings account –  any additional funds

Business set-up:

I drew-up a financial forecast, for the first seven months of the business we would need to spend £3,000

This was split:

  • Hosting, servers, providers (e.g. Google Apps and Git hub) etc.
  • Telephone line (one of those answer machine services)
  • Stationary (business cards etc.)
  • Insurance
  • Day-to-day expenses (coffee for clients)
  • Freelance support
  • Accountancy fees (about £300 for the first 7 months)

I did not have £3,000 to add to the funds, one of the other directors loaned it to the company (at a rate of interest confirmed in our Shareholder’s Agreement).

This worked for us, for the following reasons:

  • We largely have the skillset we need to not only have the ideas, but to deliver them – hence our spend on additional resource was limited to one freelancer
  • We largely had the kit we needed, old PCs to act as servers, home computers, a personal Mac book – when we move to an office and need to up-scale this will get expensive
  • The Internet – the lovely, bloody, wonderful, internet – this meant that we can communicate freely, collaboratively and regularly without having to be in an actual office

We will be looking into an office as soon as finances allow – more on that nearer the time.

If we had to buy-in people or kit our £3,000 would have served us for about a week, but because we had these things. It kept us going for seven months.

The day our first invoice was paid, my savings were depleted to the point that I wouldn’t have been able to pay my next month’s rent.

If payment of that invoice had have been late (and let’s face it, payment often is) – I’d be in a very difficult position right now, trying to work out who would be the best person to borrow money from not to lose my house.

But it IS possible to get going, without a huge nest-egg, it’s scary as hell, every single day – but it’s possible.


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