Scrambling for finance when starting up a company is taxing. What’s even more stress-inducing is trying to figure out just how much money you’ll likely need for a smooth start.
In a traditional business model, you might find it easier to find a ball-park figure because there are loads of templates for generic business plans and financial forecasting documents on Google. Any business coach you consult with is also likely to be clued up on this topic. But what if you’re looking to start a remote company? This is where things get a little bit tricky.
A remote business won’t have the same outgoing or operational costs as a brick and mortar firm. Namely, the business won’t require a monthly rental to get started. As this business type is new but insanely popular, we’ve laid out the answers to some of the most frequently asked questions about finance and the start of your flexible firm.
Q: Is Building a Remote Company Cheaper Than a Regular Start-Up?
A: To put it bluntly, yes – remote companies are cheaper to run.
This is mainly to do with the elimination of operational costs such as monthly energy bills and commercial rent. The business will also not have to house, train or provide resources for its staff. In the long run, this all saves money.
Creating a remote company might also have some hidden financial benefits, such as dishing out less sick pay. Remote workers are less likely to call in sick – having a cold while working tucked up in bed is after all, far different from dragging yourself out of the house and into the office when feeling run down. Hubstaff estimates that this subtle change in employee behaviour could save a remote company $1,800 per employee, per year.
When starting a remote company, there’s usually a lot less financial risk. It would be unlikely that a remote startup – that will most likely sell services in a digital or technology sphere – would need to purchase expensive machinery or items to get up and running. As noted, you also won’t have to sign any long-term leases that might come back to bite you if you have a slow-burning business on your hands.
Q: Do I Need a Bank Loan?
A: The answer to this is quite reflective as to whether you’d need a bank loan to run a traditional company. Although you’ll need less capital to incorporate a remote business, it’s totally up to you what form of fundraising you choose.
Not everybody will feel comfortable getting a bank loan and feeling indebted to a corporation, this often puts pressure on a small business that might not have its financial projections fine-tuned just yet. The trade-off is usually involving a private investor, where a portion of your business shares will be given to this individual.
The real toss up is whether or not you feel brave and bold enough to go it alone. If you’re a protector of your firm’s profit pie, you might want to opt for the bank loan. On the other hand, if you’re new to running businesses, the extra support from an investor might be just what you need to get the ball rolling.
Q: Do I Need to Pay a Recruitment Company to Help With Hiring?
A: Traditional companies often outsource recruitment in the early stages of their business to find suitable candidates for department positions. In terms of finance, this is an extra cost to your business. In remote companies, however, this stage isn’t so crucial.
You might want to hire a recruitment specialist to whittle down the influx of applicants but it’s certain that you won’t have any problems finding people willing to work for you. Remote positions are highly coveted due to their enhanced workplace benefits – meaning you won’t have trouble finding potential recruits.
It’s not true that your laidback company culture will only attract lazy applicants. Remote work appeals to all sorts of professionals including qualified mothers who want to stay at home with their family, freelance professionals who are looking to supplement their income and highly-motivated individuals that like to get stuck into their workload alone.
As a remote business leader, you’re also more likely to attract top talent by having access to a much larger labour pool – the entire globe. Rather than recruiting the best of the bunch from your local area, you can find individuals with relevant technical skills from almost anywhere.
Q: Do I Need a Physical Office?
A: No, but you’ll likely need a virtual office address (and virtual phone number, while you’re at it).
One of the major pluses of owning a remote business is ridding yourself of office space. Office space is a costly asset that most employees dread commuting to. In fact, the commute to the office is also bad for the environment. It’s a winning situation for all those involved to be part of a business with zero office space.
While you might be able to ditch the corporate office space, it’s a good idea to invest in a virtual office address. This gives your brand a sense of locality, even though it’s likely to be widespread across the world. An office in Manchester will signal to prospective clients that you’re a local, legitimate business. How much does it cost to buy an address? When purchasing a virtual office address, use your common sense. For example, a virtual office in the heart of Spinningfields is likely to be more expensive than other districts in Manchester. In short, the prices of a virtual office address, reflect the real estate prices in a given area.
Sometimes a virtual office address is essential. For example, when setting up your business with HMRC, you’ll need to provide a business address. The same goes for setting up a business bank account and registering with most mailing services where you’ll need a managed PO Box to receive important documentation. Not to mention, your localised business snippet on Google will greatly benefit from a physical address that can be shown to searchers.
Q: What Are The Basic Start-Up Costs For a Remote Company?
A: Here are a few things you’ll most definitely have to pay for as a remote company:
Business Registration – You’ll need to incorporate your company with the UK government to make sure that you’re eligible to pay taxes and employ others. This costs around £12 for a standard application.
Subscription Software – Remote companies hardly use physical machinery, but they’ll always use some form of software. Monthly subscription bills like project management software, communication messengers and promotional platforms will become the norm. Prices vary depending on the provider, but you might find yourself dishing out in excess of £500 in the first few months of trading.
Subsistence – Being a business owner is hardly glamorous for the first couple of years. You will, however, have to work out a monthly subsistence cost that acts as a wage to support yourself at a minimal level. This includes essential costs such as rent and food.
Q: Great, I Saved Up The Start-Up Costs – Am I Good To Go?
A: Not quite. While there’s no perfect time to start a business and as such, you can’t wait forever to get going, you should make sure you have a contingency budget.
A contingency budget is almost like a safety blanket of money that can support an operational business if the rest of the cash flow dries up. This is essentially a Plan B in the case of ultimate failure. While no one plans to fail, only a fool wouldn’t prepare for the worst. Some sites advise that a business contingency budget should be anywhere from 10 to 15 percent of the overall business budget.
We’d advise having a larger sum up your sleeve – a figure that should amount to support a fully operational budget for around 3 months. In essence, this is the same advice a property developer might give to a homeowner thinking of leasing out their house. Make sure that you’re covered for the unexpected. In short, if you can’t afford to keep the entity afloat for 3 months, don’t entertain the idea.