When you’re starting a business, there will be a million things on your ’to-do’ list. As you organize your website, hire a graphic designer and stock some of your inventory, you may notice bills piling up without much initial return. The key to a successful long-term business is positive cash flow – are you setting yourself up for success?
See Also: How to Save Money in Your Business
In order to get your business off the ground, you will need to watch what you’re spending. As you continue on your journey as a frugal business owner, you will develop cost-effective habits to ensure greater profit margins. When I say frugal, I don’t mean that you’re cheap – or that you should approach your business with this mindset.
There will be some areas in which you’ll need to spend money, that’s the reality of owning a business. Being a frugal business owner means that you know where your time and money are best spent. Think of it as doing more with less. If you’re looking to start a business or you’re currently trying to get your company off the ground, here are ten tips to help you save money.
1. Utilize Social Media
Social media is an amazing business tool which allows you to both network and advertise for free. Networking will be essential when you first start your business as it will help you reach out and potentially build beneficial relationships.
Unless there’s a specific event in which you cannot pass up –conferences are expensive- network online. Twitter is a great example, as businesses can communicate and help one another build on their ideas and goals. LinkedIn is another platform that many professionals are using to their advantage. These sites help you build a loyal following, search for prospects, and grow as a business.
Just as you can connect with potential investors and gain advice from those you respect, the same is true for potential clients and customers. Promote your products and services on all of your social media platforms, focusing on your target audience. Advertising is very costly and if you can cut some corners in terms of getting your business out there, you’ll be sure to save some cash.
2. Work on Your Shipping Costs
Shipping costs add up and if you plan on running an online business, for instance, you may need to ship a range of products. Sure, you can incorporate the shipping costs into the price of your product or ask the customer to pay this fee straight-up, however, you’ll want to keep these costs as low as possible.
The less you charge for shipping, the more you’ll sell. This will require some planning, but it will also ensure that you do not overpay. If you cannot offer your customers cost-effective shipping, you’re going to reduce your profits. Landing the best shipping rates can be achieved in a number of ways:
- Use third-party insurance instead of your carrier’s insurance options.
- Ship in bulk whenever possible.
- Once you have selected your carrier, work with their small business specialist. They will help you match your shipping requirements with the most cost-effective fees and services. Also, don’t be shy to negotiate rates.
- Provide options – if your company has worked out the cost for standard ground shipping and that is ’covered’ by the business, offer express options to those who are willing to pay the fee themselves. Meaning, for those who need their product the next day, have this option.
- Purchase pre-paid shipping labels.
3. Cut Rent Costs
Rent can drive a business into the ground quickly. You may have a great product or service, but if you cannot keep up with the rent, you’ll go out of business before you have a chance to grow. There are a number of ways in which you can spend less on rent, putting more money back into your business.
When it comes to office or business spaces, why not cohabit with another related business? Perhaps you have seen this before? One building, housing two separate businesses. In some cases, you may even see two separate businesses which operate in a cohesive manner.
You could also rent a space that has extra room, allowing you to sublet the available space. This is something that will need to be addressed in your lease, so make sure you discuss your options. You will be earning money to help cover your rent, while you operate your business.
Running your business from home is also an option. This will reduce your overhead while allowing you to deduct certain expenses when filing your taxes. If this is the route you take, make sure you have all the legal requirements in order. Are customers coming to your house? Do you have insurance? Before you open the doors to your home, ensure that everything is in order.
4. Don't Count Out Public Relations
If you are starting a startup business, why not reach out to the public? This can save you a ton of money in terms of marketing and advertising. Get in touch with local magazines or newspapers regarding your story. Local media outlets are typically looking for local stories regarding their community. Write an article, complete with related photographs and send it to multiple papers.
Depending on your area of expertise and your budding business, you could also potentially give a speech in your community. Various groups will often invite guest speakers to set events, supporting a set cause or goal. If you are looking to promote your health-conscious energy bar, why not seek out nutritional workshops or big health events? You will be speaking directly to your target market.
5. Cut Back on Variable Business Expenses
Investing in your business license is an expense that is fixed, without much wiggle room. Once again, these will be the type of expenses which are necessary for your business to grow. On the other side of the coin, you’ll have your variable expenses, those in which you do have control over.
Energy costs are a great example, especially if you’re operating multiple locations. A little here and a little there, adds up to a significant amount of savings. Whether you invest in energy-efficient lighting or ensure that all computers and lights are shut off at the end of the day, you can cut down.
The same is true with office supplies. Although it may make sense to buy in bulk, this is not always the best option, especially for startups. Simply invest only in what you need at first. You don’t need 5000 paper clips for your starting business, so why waste money you don’t have? If you’re buying online, only buy from sites in which offer free shipping.
6. Take Advantage of Credit Card Rewards
When first starting a business, regardless of the industry, there will be some startup costs. Even if you’re crafting your own wooden birdhouses which cost you nothing in labour, you’ll still need to purchase materials. If you’re opening a bakery, you may need to invest in an oven, fridges, and more. As a side note, leasing equipment is always an option as well.
For these types of big purchases, use a cash rewards credit card. You are spending money anyways, you might as well make some of it back, right? There are some credit cards that offer 1.75 percent cashback. If you spend $50,000 total, you would gain $875 back at 1.75 percent. That money can be re-invested back into your business, essentially for nothing.
7. Take Advantage of Free Apps
Depending on your business, you may require a range of software-based tools. There’s a lot to keep track of and between billing, email, and other needed services, specific tools can add up. Instead of sinking money into these software tools and programs, research free apps first. Here are a few apps to check out:
- Squarespace – helping business owners create exceptional websites. You can download the app to your iPhone or iPad, tracking your ideas. You can make notes, blog, build a portfolio, and more. No matter where you are, this app makes it easy to write and edit posts, while managing comments.
- Sunrise Calendar – this app makes scheduling a breeze. Not only can you view your schedule in an organized and concise fashion, but you will also receive alerts when meetings and appointments are approaching.
- Mint – this personal finance platform will allow you to track your expenses and investments, while offering an effective budgeting system. As a startup, tracking your finances will be absolutely critical. This will get you into the habit of making wise financial decisions.
8. Outsource Instead of Hiring
If you’re in need of some extra help but do not want to commit to a salaried employee, outsourcing is the way to go. You can hire anyone from virtual assistants to graphic designers, paying them on an hourly basis. That way, when you need someone, they’re there – saving you the cost of a regular employee taking a salary.
Sometimes, startup companies hire employees without much money coming in, only to find they cannot continue to pay them. This isn’t fair to the employees and it could jeopardize your business. Do not hire full-time or even part-time employees until it’s absolutely necessary and you can afford it.
9. Take Greater Control Over Legal Fees
For startups, legal fees can take a large portion of the company’s budget. In many cases, however, legal steps need to be addressed to ensure the longevity and protection of your business. Since some legal fees can cost hundreds of dollars an hour, it’s critical that you speak to your lawyer about how time should be spent.
If there are things you can get together and in order for them, do so. The less they need to do, the more you’ll save. Whatever you can prepare for them ahead of time, could save you a lot of cash. Also, ask about your options. In some cases, it’s best to pay per-project, instead of an hourly rate. In some cases, although rare, lawyers won’t fully bill a company until they’re better funded. Don’t be shy to ask, you have nothing to lose.
10. Consider Local Sourcing and Partnerships
Depending on your needs, you may need a lot of one item or ingredient. For example, those who run a restaurant will need to source a lot of food, while breweries need to source a lot of water and hops. When you focus on sourcing items locally, you can reduce your transportation costs. This is especially true for those who require a specific item or ingredient on a daily basis.
A great example is Beau’s All Natural Brewing Co, an Ontario brewery that is known for their utilization of organic ingredients and sustainable practices. They were sourcing local spring water to use on a daily basis. They took this concept of local sourcing to the next level, sharing their facility. Their water supplier has now moved into their brewery so that they can package for retail, providing Beau’s with around the clock access to fresh water. This reduced their transportation costs while gaining publicity for their environmentally conscious efforts. It also helped the water supply company, increasing their profits.
See Also: 5 Common Legal Mistake for Startups
You may have the best idea and a great work ethic, but without effective money management strategies, your business could fail quickly. Start making wise choices from day one, utilizing some of the frugal tips above.