A healthy start up business must be flexible and ready for unexpected changes in demand.
Key to building this flexibility into your business is to minimize fixed costs and overhead.
First of all, what are fixed costs? A fixed cost is any cost that will remain the same, regardless of changes in your sales volume. A good example would be car lease payments. Sell more or sell less, your car lease payment will still be $299 this month. Rent, employee salaries, and monthly service provider fees all increase your fixed costs, and should be minimized.
Instead, structure your business to have more variable costs. Don’t pay salaries to employees. Instead, hire independent contractors to do individual jobs. Don’t rent warehouse space; pay a per-piece rate for storage.
As an example, book publishing sites will entice you to pay a monthly fee for premium services. You will have to pay this fee whether you sell 1,000 books, or no books at all. Therefore, think very carefully before you click the box to increase your overhead.
[Image: Every teardrop is a waterfall by dollen, on Flickr]