So your business plan has legs and you’ve decided to take the plunge and start your own company – congratulations! Now you need to get organized and begin piecing together your operation. But where to start? Where should you commit your precious capital?


With a million different things demanding your time and energy, it’s all too easy to haphazardly commit resources without getting your priorities in order. This approach isn’t necessarily fatal, but it can be if you end up overspending where you shouldn’t and skimping on the important stuff.

In this post, we’ll be examining some of the key areas that require your attention during the start-up phase and determining when and where you should spend your capital. But first, a caveat…

Every Small Business is Different

Small businesses come in all shapes and sizes, so there’s no one-size-fits-all solution to start-up budgeting. Something that’s unimportant to one business could be critical to another.

I’ve tried my best to cover areas that every business needs to address and to provide examples for when and when not to spend, but there are certainly dozens of additional choices that you’ll have to confront in your specific line of business.

In general, this post assumes you’re getting started with limited capital and that you’re on your own. If you find that the budgeting decisions facing your business aren’t addressed here, hopefully you’ll at least walk away with some ideas on how to prioritize and address them.

When and Where to Spend Money

Each of the items below are important to address, but whether you need to spend a lot of money on them is yet to be determined. Of Nolo’s top 10 mistakes made by new businesses, three specifically relate to spending when it isn’t needed, so these decisions definitely deserve more scrutiny.

These are two areas where it often pays to err on the side of caution. If you have questions about your legal structure, have a particular agreement you need drafted, or are ever uncertain about a legal or financial issue, hire a professional. They will save you money in the long run.

That being said, you don’t need a lawyer or accountant to hold your hand every step of the way. Use them to confirm you’re handling things appropriately or to set you on the right track, but avoid retainers or monthly fees just to have them on standby. You can do basic bookkeeping on your own, and companies like LegalZoom can assist with forming your company or preparing standard agreements.


Hiring and managing employees is a major commitment, and a major expense. Don’t make this decision lightly. It’s probably best to hire contractors or outsource work before you formally hire an employee.

For example, if you feel you need a receptionist to answer calls and give your business a professional image, look for a company that provides virtual answering services. If you have specific labor needs, look to oDesk or another online freelance marketplace where you can connect with qualified contractors.

Marketing and Advertising

The internet has dramatically altered the marketing industry. Don’t waste money on traditional channels like the yellow pages or your local newspaper. Do spend money on setting up a professional web presence. Trust me, people can tell if you’ve designed your website on your own and it makes a poor first impression.

Paying a marketing company for ongoing work is often too expensive for small businesses, so get help with the design of your website and branding and then invest the time and energy necessary to move things forward on your own. Setup a blog, claim your local listings in the major search engines, and spend time generating content. When you become too busy and can’t keep up with it anymore, hire a web marketing company to help you out.

Space and Equipment

There’s no shame in working from home, purchasing refurbished equipment, or using your cell phone as a business line. Don’t spend money leasing space you don’t need, and don’t rush out to buy the latest and greatest gear just because you can write everything off as a business expense.

Use what you’ve got and buy used when things need replaced. When your house is bursting at the seams and you’re in desperate need of more space, expand into the garage. Seriously. Securing office space is expensive.

Software and Other Web Services

Before you spend a dime on a CRM system or fancy office software, first look to free or open source alternatives. Google Docs is a free alternative to Microsoft Office and a lot of CRM providers have a free tier for small businesses (like Insightly).

At some point it will be worthwhile to invest in a fully featured platform like SalesForce, but first you need to spend time getting your processes together and determining your needs. Using free options is best during this period because paid services will likely be underutilized.


Getting your business started can be expensive, but there are a lot of ways to save money and avoid overspending. By taking the time to research alternatives and truly weigh whether an expense is justified, you can ensure every dime is spent wisely and that you’re taking the steps necessary to help your business prosper.

If you have any tips on small business spending and/or budgeting, please share in the comments. There’s always more to learn!