Dubai: After a decade of working as a human resource professional in the UAE, expat resident Candace Braganza decided to quit her full-time job and start her own small online business called Ethica Eco, a business focused on eco-friendly products.
However, the business needed an initial investment of Dh115,000, which is why she needed to plan how to gather such an amount by putting together her savings and understand how much it would cost to run the business. Also to accommodate such expenses, she needed to plan what steps she would need to take to curtail unnecessary lifestyle costs and budget her personal finances accordingly. Here’s how she went about it.
To begin with, how did she put together the initial investment amount?
A self-proclaimed disciplined saver, Braganza diligently saved Dh5,000 from her monthly salary for at least a couple of years, which amounted to a total of Dh120,000.
“Right from my first job starting with a small amount I have always consciously saved a portion of my monthly salary that ultimately went up to Dh5,000 per month.
"During the initial years I used to treat and use the monthly saving as emergency fund but over the years it started adding up. Fortunately, my savings helped to start the business because due to pandemic-related complications I lost my end-of-service money.”
What costs did the initial investment cover?
The initial investment of Dh115,000 covered major expenses for Braganza, as listed below:
“Instead of paying Dh150 per month as maintenance charge, I opted for a minimum balance bank account. I saved at least Dh8,000 on website designing by doing it on my own, which took two months. In turn this has helped me to invest in a machine to make bags using eco-friendly raw materials and fashion discards that I source locally and internationally. Going forward, I have to start saving for my annual trade license renewal that will cost around Dh11,000 although the visa is valid for three years.”
Going forward, I have to start saving for my annual trade license renewal that will cost around Dh11,000 although the visa is valid for three years.
Bear in mind operating expenses and hidden costs
Setting up a business is only one part of the job. Once it is up and running there are more expenses to account for. Operating the business on her own, Braganza does not have to pay salaries but there are other expenses including order fulfilment, payment gateway, marketing and advertising spend.
From a flat charge of Dh150 per month for fulfilment irrespective of the order volume, Braganza has now shifted to a pay per order plan with charges ranging from Dh18 to Dh25 depending on the emirate. She uses a payment gateway that charges Dh1 per order plus 2.9 per cent commission per transaction. In addition, she spends a total of Dh880 annually on editing software and Dh1,000 per month on social media advertising to gain brand awareness.
“Every small to big aspect of the business has been a learning curve for me. At the planning stage, I had accounted for Dh40,000 for product and raw material sourcing that ended up at Dh70,000 due to high import duty, shipping charges and VAT (value-added tax),” Braganza said.
“I also understood that there are hidden costs. I have to pay an additional charge to the bank, sometimes even as high as 10 per cent of the amount, for making payments in dollar for sourcing since it is from a UAE-based account. This was a huge lesson for me. I have tried to find ways to reduce this cost, but the only option is to open a dollar account, make and receive payments in dollars. However, not all payment gateways let you do that without paying a premium.”
Consciously curtailing monthly expenses by Dh5,000
Even as Braganza banked on her savings, she also consciously curtailed her monthly expenses. While working full-time Braganza used to spend Dh10,000-12,000 per month including living expenses, utility bills and pet care, which has been reduced by at least Dh5,000. Here’s how:
“Earlier I used to spend Dh2,000 monthly to get hair colour and eyelash extensions done and some other services. Now I have stopped colouring my hair altogether and reduced the frequency of salon visits spending only Dh200 per month. I used to spend Dh300 per month on a bottle of perfume, but now I have learnt to mix essential oils to make a natural scent spending Dh50 to buy the ingredients,” Braganza shared.
“Instead of buying full-priced clothes and accessories frequently, I buy less and opt for cost-effective options like thrift shops reining in expenses from Dh2,000 to under Dh500 per month. This has not only helped me to save money but also buy consciously based on need. I have also managed to save on pet care costs by discontinuing my dog’s daycare service, saving Dh1,500 per month.
"In addition, I also save at least Dh300 per month by consciously shopping natural dog supplements availing offers and discounts and making well-researched grooming products at home. I have also managed to bring down my utility bills to Dh1,500.”
Earlier I used to spend Dh2,000 monthly to get hair colour and eyelash extensions done and some other services. Now I have stopped colouring my hair altogether.
On the other hand, Braganza decided to not curtail on socialising and dining out, maintaining a monthly expense of Dh2,000.
“That’s because besides the social aspect, it helps me to stay connected and meaningfully network with the right people, which eventually creates awareness and benefits my business. After all, promoting a start-up and making people understand that buying eco-friendly products is not always expensive take time.”
“The business will need 9 to12 months to bring in return on investments. So, I have to give it enough time to pick up pace and for this I had to consciously plan business-related expenditures and carefully budget my monthly living expenses,” she concluded.
