More and more startups these days have a technology component to their business. And then for some, technology is not only core to their business, but the foundation of it. But while tech has reduced or altogether eliminated many of the barriers to entry that existed even 10 years ago, not every business owner has a clear understanding of what to expect in terms of budgeting for their technology needs. Needing to know how to budget for your startup is crucial.
This article will break down some of the more common IT expenses to help young companies anticipate and plan appropriately.
Without the right people in place, your up-and-coming Spotify killer will never get beyond filing some paperwork with the state. For the first few months or years, your company may be just you, in which case you’ll probably need some outside help. So you have a few options:
1. Partner Up – You’ll run into plenty of technology-based businesses that begin with 2 people: the sales person and the techie. The techie typically either builds all of the tech themselves, or goes on the hunt to vet out other IT folks that can help. If you’re a sales person with a tech background it’s possible you can wear both hats but realize that sales & marketing is just about as important as the product itself.
2. Contract – One day you’ll have a staff of 50k employees spread across 4 continents. Today, you just need a small team you can contract with to design and develop your product. If you have a techie partner, let them track these people down. In the end, you want to build a relationship with a vendor that typically works with startups and small businesses. Don’t make cost the deciding factor. You don’t need to bring on the top digital agency in the country, but you also shouldn’t settle for bottom of the barrel. It will be much more costly to throw everything away a year from now and start over. Start small with a vendor in it for the long haul.
3. Hire – Hiring even one person full-time is not really a recommended option, even for a well-funded startup. Fully explore options 1 and 2 above before considering this route. And even then, you should have a viable product that is generating profits before going the full-time employee route.
Like with your personnel selections above, start slow and modest when considering hardware you’ll need to power your business and how to budget for it. Amazon Web Services can offer pay-as-you-grow aka “On-Demand” IaaS for as little as $0.085 per hour. Or look to providers like Singlehop and secure a dedicated server for as little as $99/mo.
As for gear (laptops, tablets, phones, monitors, routers, etc) for you and your staff, look into a leasing program as opposed to buying. If your business goes under (hopefully not) you won’t be stuck with all of these gadgets to pawn off. Many manufacturers offer them such as Apple or HP. The $1 buyout plans that spread payments over 24, 30 or 36 months are a nice option. Although if you’re considering a distributor such as CDW, maybe try a smaller, local distributor, first. You’ll have better customer service should something go wrong, which is often the case with hardware. And while landline phones are going to eventually be important for conference calls, consider going all mobile for now while also leveraging free services like Skype and/or Google Talk.
This is also where the people you brought on above can help navigate you toward the hardware solutions that best fit your business. You want to roughly plan for the future – but first things first – secure some basics to get you off the ground and then worry about scaling later.
Ah, software. Software exists for just about anything you need to run your business.
Here are some of our personal favorites:
- Accounting: Xero, FreeAgent, FreshBooks
- Project Management: Basecamp, Buwhee
- Sales & CRM: Capsule CRM, Nutshell
- Document Management: Dropbox, Box
- Communication & Collaboration: GChat, Skype
- Community & Social: Facebook, LinkedIn, Twitter, HootSuite
- Payments: traditional: Authorize.net, PayPal vs. mobile: Square, PhoneSwipe
Most of these services offer free or nearly free versions to start. Lovely.
Software such as a website, technically falls under marketing. We’ll follow this piece up with a post geared specifically toward finding and selecting the right digital agency to suit your company’s marketing, branding, web & mobile needs. We’ll also be contributing a piece about the many software options when choosing platforms, frameworks, libraries, testing suites and APIs to actually build your product.
With the right mindset and understanding of technology, you should be prepared to know what to expect. Knowing how to budget for your startup, helps your startup tremendously. And when in doubt, tap someone you trust to help you.
Jay Melone is the CEO of DigitalXBridge (aka DXB). DXB is a digital agency offering web & mobile design and development, branding and strategy/consulting for all things web.