The financial realities of running a business can be harsh for many entrepreneurs, especially startups. In fact, many small business owners admitted that they’d spent more than twice their initial expectations in their first year. There could be dozens of reasons why this kind of mishap happens, but generally, it’s due to taking financial missteps, from the forecast to cost reduction itself.
One obvious way to keep your startup afloat, even during a crisis, is to save as much money as you can. By doing this, you can learn how to be smarter and more resourceful as your business grows. Listed below are several ideas to help you build efficient savings for your business success.
1. Negotiate with your vendors
The first thing to remember is that vendors want to stay in business as you do. As a matter of fact, many of them are usually willing to negotiate for more affordable rates rather than losing a valuable client. Talk to your vendors and try to negotiate for a lower price than what you’re currently paying. Plenty of companies out there were always able to get better rates for their necessities, from phone bills to office supplies. As for you, you can also save hundreds of bucks on your operating expenses. No harm in trying.
2. Cut irrelevant employee perks
Are you one of those businesses that offer free meals to your in-house staff? You might want to rethink this strategy, particularly if you’re just in your first year. Review your expenditures and check for any extraneous expenses you’re spending a huge amount of budget on. Going back to the free meals, if this is the situation, cutting them off would be a great decision financially. If your startup, and of course, the employees, don’t want to give up such a benefit, you can try looking for a more affordable alternative. Why not offer a simple bagel and coffee on Monday mornings?
3. Be smart with your ventures
There’s an amazing array of opportunities and ventures in the industry today that won’t just be beneficial for your business but also the society and the environment as well. If you an entrepreneur who’s also devoted to helping others, fret not because there are actually ventures out there you can try. Some might cost you real cost upfront, but adding a smart income stream can mean more cash and savings for your business in the long run.
For instance, if you love helping out the young community and good education is something you constantly support, you can franchise a preschool center in your local community. Or, if you’re a supporter of eco-friendly practices, you can support other small community-level projects in your local area. These include funding projects for local ecology and artistic endeavors, and again, educational opportunities.
Such ventures can help you build a positive reputation for your business, making you visible to more customers and clients. Choose the ventures that allow you to share your passion with the world and give you the potential to earn and save more.
4. Implement lean management
Another smart strategy you can use is lean management. This refers to practices that aim to boost efficiency and reduce waste at all business levels. Implementing lean management practices is also beneficial in eliminating things that don’t help your young company grow and reduce your operating costs. This is also a great impression on potential investors!
First off, focus on any wasteful tendencies your business is spending money on, such as excess inventory and poorly run meetings. In-person meetings can hurt your business budget for real due to the travel or transportation costs, especially if you do them too often. It would also be best to always look for cheaper alternatives and use free trials for applications and software. Make sure to look for other lean management strategies that suit your business.
5. Understand tax obligations
Taxes is no doubt one of the biggest expenses that any business has. It’s even a pain to look at on your balance sheet or income statement. However, ignoring them can lead to bigger and more expensive problems. You’ll get hefty fines and penalties! Understanding your business’ tax obligations can help you get some real cost savings. In fact, there are legal ways to reduce your tax.
Potential tax deductions range from employee benefits to auto expenses. Besides checking with the IRA, you can also get information regarding tax exemptions and deductions that could apply to your startup on the U.S. Small Business Administration. Or better yet, have your financial or tax advisor seek out tax savings opportunities.
Saving money can be an added struggle for any startup like yourself. However, its benefits far outweigh the challenges that come with it. It gives a rainy-day fund, an opportunity to upgrade your business tool, and most of all, it can help your small business be more financially stable. Don’t rush and take your savings goals one step at a time.