Top 10 Ways to Save Money When Starting a Business
How to conserve cash flow, cut costs, and keep your business profitable.
The world we live today is run by mega corporations, ultra-successful entrepreneurs and internet gurus who invested all their time, money and efforts in entrepreneurship. All the products that we use at our homes, in restaurants and even in the offices are all a result of someone who sacrificed their savings and decided to risk it in a business. It is good to know that they didn’t start at the same point they are today.
When you hear their stories, you will be amazed how small they started out at the beginning but look at them now! They are what many people refer to as an American success story.
Owning a business, however small it is, makes you feel proud. No one should be ashamed of humble beginnings since that's what it takes to get you where you want to go. When you have a small capital, do not wait to start your business. Go for it now with the little that you have and make it multiply in the business. Keep in mind, for a business to be successful, you should focus on minimizing costs as much as possible. So, what are the best ways you can save money when starting a business? We are going to break down the top 10 best ways to save money when starting a business.
Run Your Business From Home
This is one of the easiest ways you can start saving a lot of money that comes into your business. With this, you have to carry out the feasibility of your business within the area from where you want to operate first.
Rather than waiting to raise cash to rent office space that will later be used as the business premises, it is advisable to run your business from your home or reach out to a friend or anyone who has a free room and use it to run your business. Paying rent every month is far way cheaper than renting out commercial office space.
With a home office or rental space, you have to make sure that it is very spacious to accommodate you as well as the goods you are dealing in for security purposes. The room should be easily accessible and more so located near or by the roadside. This enhances accessibility for your customers as well as the suppliers who supply you with goods. It is also good to talk to your landlord, if you are renting, about your situation before you even start paying the rent. Explain what you are doing so that he gives you a grace period of about one month before you start paying the rent. This will give you time to approximate all your monthly income as well as make you calculate the best distribution of the costs.
Buy Used Equipment
One mistake many young entrepreneurs have been doing is starting a business with brand new equipment or machines. This is not the way to go. It is expensive for you considering the fact that you do not have a lot of money to play around with. The only cash you have is the capital for starting a business so the money that you have needs to be conserved. New equipment is very costly and anyone especially struggling business owners should never go for them.
Look for established companies in the line of your business and ask them about the availability of the equipment that you need.
They may give it to you at a lower price. Whether they sell it to you or just lease it, both ways are way cheaper compared to going for new equipment. It the equipment is leased to you within a certain time period, try negotiating to the lowest rate and utilize it to the maximum at that period. It is sold to you, the better off you are but make sure that it is in a normal working condition. Look for an expert who can help you to detect any flaws with the equipment and establish whether it can be repaired. If it can, all is well and good, if it cannot, leasing would be the better option.
When starting a business, the only thing that should stress you out is how best you can conserve cash within your business so as to enhance its growth. Without conserving cash flow, businesses would rarely grow.
This means that you need to be on top of the cash flow on a daily basis by looking for ways on how to conserve the money that flows into the business. One of the best ways you can use to conserve cash is engaging in bartering with others. You may exchange goods for goods or goods for services and vice versa. For example, if you run a web design company and a marketing company approaches you to design a website for them, do not ask for money but rather agree with them on how they can create and run a marketing advert for you.
This is called survival tactics in business. Another example is if you run a clothing company and a supplier wants you to make them a gown or any type of clothing, do not charge them but rather say that when you are through with the whole sewing process, they will have to supply you a certain number of materials instead of making payments. This will really help you in cash conservation but remember it is not all about cash conservation but also putting back the money conserved back into the business so as to generate more cash.
Don't Hire Full-Time Employees
As said earlier, it is about conserving cash in the business and nothing else. As a small business owner, employing somebody on a permanent basis could create a lot of financial constraints in your business. How? A permanent employee may need insurance, pension and allowances even which at the start you won’t be able to afford. So what do you need to do to avoid these costs? Do not hire anyone on a permanent basis. If your computer system has developed an issue, you do not have to hire a computer tech for that. You can just call in a qualified IT guru to solve the problem within a few hours and get paid and that is it.
Why would you employ an accountant when your business cash flow is just a small figure? It would be illogical for someone to be seated here all day doing nothing and getting paid in the current world. When it comes to accounting purposes, you only need to call in a certain qualified accountant at a period of let’s say three months to balance the books of accounts and tell you how well your business is doing financially. This is the ultimate way a small business can reduce costs and enhance their growth.
Be a Fan of Free Software
When you go online even now, there is plenty of free software which you only need to download and nothing else. There are no charges whatsoever. Almost every aspect of a business such as accounting among many others is done by free software. When you get free software, it does not mean that it is in any way inferior compared to the ones being sold. It could be missing some premium features but a small business has only a few things that need to be done and so the premium features might not be necessary for you during start up.
Many free software downloads come with a 30-day free trial period after which one is required to buy. Since your aim is to save cash for your business, do not make a mistake of going ahead and buying it. You only need to uninstall it from your computer and then search online which will give you another 30-day free trial period after the installation process. This is how you will survive until your business is financially stable to buy software and maintain the updates of the software. If you want to save cash then free software is there for you.
Invest Cash in Interest Bearing Accounts
Before you go into business expansion, it would be good for you to evaluate on whether it is the right time for you to expand the business or not. If it is not, do not put back the profits into the business. It is good to keep the money in an interest generating account for some time while doing the evaluation about the validity of the business expansion. This is another way of generating cash out of your cash without necessarily engaging in the sale of goods. It is called buying time in business when thinking about the next step.
Hire Carefully and Strategically
Yes, experienced employees come at a cost and thus as a small business, it is good to avoid them at all costs. Instead of going for highly qualified individuals, it may be a better strategy for you to hire individuals with moderate but efficient skills. A small business does not have complicated things that would force you to hire the best experts in the field. You need one a person who can do basic things that keep the business running. This means that fresh individuals from school are best suited for your business.
In fact, you should take them as interns first before absorbing them as employees on contract. With contracts, make them as short as possible and at times when there is no bulky work, just call them in and pay them for days when they were at work. This will make your business very productive in the long run without having incurred a lot of costs.
Negotiate With Vendors on Discounts
For you to survive in the current economy, one needs to have very good communication skills. Without speaking your mind, someone else will speak their mind on your behalf. Therefore, it is good for you to be very loyal to the vendors in terms of making payments. When this is done, now it is your turn to somehow dictate the terms of the business that you want. You have a say on how the business between you and the vendor shall be done. First of all, negotiate for discounts on the goods that the vendors supply to you. This will be a good way to lower the costs of running your business and sell them at a higher price enabling you to boosts the profits for your business.
Another way of dealing with vendors is by taking the goods on credit terms and make the payments after all the goods are sold. This will be good since you will be selling the products on behalf of the vendors and enjoying the profits without even investing.
Yes, you got it right. When you are starting a business, it is good to keep in mind that the cash that flows into the business is always more than the cash that goes out of the business. This means that if you hire someone to do a specific job for you, it would be good to defer their payments for a while. This will allow you to buy more goods using the money that you would have used to make the payments and once the goods are sold, you pay them using the profit. It is one of the brightest ways a small business can see growth in their early stages.
Buy Goods in Bulk
When you buy goods in bulk, vendors will give you very large discounts. This will enable you to make a lot of profits after the sales. This means that when you are dealing in goods that do not expire buy them in bulk and save on costs so as to increase the profit margins of the business in the near future.