There’s no point in sugaring coating this: running your own business is hard. Very hard. According to FastCompany, after the first 5 years, only about half of all small businesses in the US make it to the 6th.
Small businesses are constantly squeezed by increased expenses, making controlling costs more important than ever. Below are 10 best ideas that can help you reduce costs and improve your chances of survival in this cutthroat environment.
Variable Staff Pay
Businesses that have slow periods should focus on reducing staffing cost wherever possible. Make staff time and pay flexible, reducing pay on less-busy times to save some money. You may also want to use family members wherever possible. Agricultural businesses are known for involving every family member, for example. Nothing stops you from getting your children of an appropriate age involved in your business as well. Young people find learning about business interesting and it helps keep the money in the family.
Barter Your Business Goods/Services
Bartering is the name of the game when you’re trying to cut cost. Offer your services in exchange for another that you need. For example, if you are a web designer, you can barter with a chiropractor down the street to get him to work on your sore neck while you work on his web site. The key is to reach out to people. Use sites like Simbi to find these people.
Lower Your Office Costs
Take a good second look at your business premises. Do you really need all that space? Really? If not, and if this won’t hurt productivity or any important aspects of your business, consider moving your business to less expensive quarters. Co-working spaces such as those offered by Wework are another great option for small businesses with only a handful of employees.
If you think deeper, you may even realize you do not need any commercial premises at all. If your business can run from home or on-the-go in coffee shops, why spend all that money on the big space in a high-brow area? When you do this, you save on office space, save money on insurance, business taxes and utilities.
When it comes to office furniture, always buy used or on an ultra low budget. A new office chair can be had for less than $100 these days, a desk even for free on sites like Craiglist. Vanity and appearance should be the last thing on your mind when you’re trying to cut costs.
Cut Vehicle Expenses
Vehicles cost money, both in purchases and maintenance, and this can affect your bottom line.
Begin by not spending so much acquiring any vehicle used for business. Why buy a brand new heavy-duty truck or cube van for your business when you can settle for something used yet pretty durable? A vehicle starts to deprecate as soon as it’s driven off the lot, meaning buying used is always a smarter choice when you put your vanity aside.
You may also consider leasing a vehicle. This can be beneficial in many ways, which include fixed monthly costs, you return the vehicle at the expiration of the leasing period, you don’t have to pay depreciation and maintenance costs.
Cut Supply Costs
Every penny saved is penny earned in wholesale supply costs. If you are running a kind of business that make a regular wholesale supply purchases (such as restaurants), you should make extra efforts to get the best supply deals. Negotiate negotiate!
The key as a business owner is to keep your eyes peeled, constantly monitoring supply costs by investigating alternate sources and checking for discounts. Don’t feel embarrassed, there is no need for that. Businesses tend to offer discounts on products and services to other businesses. Finally, consider finding other businesses and pooling resources together. You can also extend this concept to other aspects of business such as advertising costs or sharing office space.
Cut Advertising Costs
Studies have shown that small businesses spend approximately 20-30% of their revenue on advertising in the starting phases. This figure can be much higher for start-ups.
In the world of social media, acquiring customers can be extremely cheap for the savvy. Build an online presence by creating a website and pages on Facebook, Twitter, Instagram and other social media. Create an email newsletter with a good lead magnet to quickly build up your list and reach potential customers for virtually free.
Advertising is critical to the success of a business, but it doesn’t mean you have to spend money to advertise.
Cut Costs on Insurance
The past decade has experienced a surge in insurance premiums, and this can take a big bite out of your finances. You cannot do without insurance as a business, but you can manage your insurance in ways that benefit you the most, reducing the cost as much as possible.
Begin by performing an annual review of the requirements of your business insurance. Have a meeting with your insurance broker to discuss all aspects of your insurance coverage and how to get the best deal. You will find favorable differences in rates offered by different insurance providers on the same coverage.
Increase your deductible to reduce your premiums, but be wise to ensure it’s not so high that it becomes unaffordable for your business. Membership of a business or professional organization can be beneficial as you can take advantage of group rates.
Finally, lower your risks by upgrading your business premises with sprinkler systems, fire alarms and security systems or patrols. This will make you eligible for insurance discounts and lower your premiums.
Maximize the Use of Your Time
Time is money. You will have to learn effective time management as a small business owner. Prioritize and direct your activities to make the best use of your time.
Instead of using slow business times for frivolities, consider taking up skills that you normally would need to hire a person to perform, such as social media management. Effective time management involves activities such as time tracking, goal setting, and prioritizing. With these you would have streamlined your work day, reduced your stress level, and achieved focus on your work.
Manage the Tax Man
If you master the art of minimizing your tax bill, you will have eventually found ways to improve your business bottom line. You need to learn to maximize all available deductions and properly enter business expenses as deductions on your tax return. Many cities offer free tax seminars and advice for small business owners. Take advantage of them.
Use the Cloud for Business Computing Needs
Cloud computing for most businesses is an excellent way to reduce the capital costs and recurring expenses on IT services. Investing in cloud computing saves you the cost of purchase, installation and maintenance of expensive servers on site, software upgrades as well as other related expenses. Cloud services such as Google’s GSuite gives you access to the latest versions of business applications and a flexible chance to increase your bandwidth and storage space.
Starting a small business is one of the most challenging, yet rewarding things you may ever do in your life. Maximum your chances of success by getting a good grip on your expenses from the get go.