We’ve all heard the statistics on how many new businesses fail within the first year of operation. This comes down to the fact that the beginning can be an expensive time which can become worse because there are few if any, high-ticket clients. It is also the period in which the business experiences the most trial and error. Few entrepreneurs start a business with all the answers and must pick up what they can along the way.
We must say that not all the tips presented here are among the most glamorous, nor will they all apply to every new business. However, keeping costs down is often a great idea until you truly make it, and we consider each of them as a good idea in their own right.
1. Consider Used Equipment and Furniture
There are bound to be tools that your business cannot do without. Assuming you don’t want to work at the kitchen table, you’ll need a desk at the bare minimum. From there, you’ll start to think about more specialised tools. Assuming that you’re not the first company to do something, the chances are that you can pick up discounted, used items for a fraction of the brand new price. None of them needs to last forever, but when your focus is on getting the job done, you need something good enough while you establish yourself.
2. Cut Back on Office Space and Furniture with Technology
If you’re in manufacturing or a similar industry, then you cannot avoid the fact that you’ll need a certain amount of space. Conversely, if your business involves you being a freelancer, you might need little more than a laptop. It is nice to have a space to use, but we would advise against signing a lengthy and potentially expensive contract for office space. Instead, use technology and the cloud to turn any space you currently occupy into your office and save the lofty office ideas for later on in your business’s lifecycle.
3. Work with Other Local Businesses
The chances are that you’re not the only business in the area – although you’re preferably the only on in your specific field. Either way, you could consider working with them to keep costs down. That might involve combining for bulk discounts, equipment sharing or a reciprocal service agreement, where you do something for them, they do something for you, and no money changes hands.
4. Cut Back on Software Costs
Regardless of your field, the chances are that you rely on often specialised software to deliver your products or services. It is no secret that corporate software licenses are expensive, mainly because they’re targeted at companies with budgets and not those just starting out. Unless your business could not deliver its services without specific software, consider going with a cheaper or free alternative. For word processing, you may move from Microsoft Office to Google Docs, and there are similar alternatives out there for just about every industry.
5. Put the Work into Finding the Right Suppliers
If your business involves buying products or services and selling them on at a markup, it makes sense to acquire them as cheaply as you possibly can. Given the importance of quality to your brand, you don’t want to go too cheap but explore past the price for additional benefits. If you can gain a line of credit, receive assistance with logistics or anything else as part of the package, such perks can be every bit as valuable as cash in the early days.
6. Maintain a Cost-Cutting Mindset
Your business will evolve massively in a short period if everything goes to plan. That means that you never know when a new opportunity to cut costs may arise. Don’t stick with a particular supplier if you can receive the same results for less outlay, don’t stick with costly marketing techniques that yield no results and ensure that there is a business case for every expenditure but the real essentials.
7. Outsource Rather than Hire
A good business has the potential to grow and scale, and there will come a time when you’re unable to do everything yourself. Not all business owners reach a point in the first year where they can even consider – or afford – to hire employees. Even if you do, you may wish to consider outsourcing first. There is no commitment, you don’t have to fill an entire working week, and you have a broader talent pool to choose from for specific tasks. When you can justify a permanent hire, there is nothing to stop you heading in that direction, without having compromised your actions in the meantime.
8. Increase Costs in Line with Reliable Income
There will come the point where you neither want or need to keep costs low. Every business needs to speculate to accumulate once it reaches a certain level, and you should not hold too tight a grip on the purse strings. However, even as your costs rise, they should only do so in line with revenue. It is better to work within your means than risk having to return to cost-cutting mode later on.
9. Shop Like a Consumer
There will be incidental expenses in running your business where you do not buy enough of something for bulk discounts or other incentives. Office supplies immediately spring to mind, and these kinds of items are the perfect time for your inner shopper to come out. Use coupons, discounts, sales and any other technique that comes to mind, even in a business context.
10. Invest in a Good Accountant
When cutting costs, the idea of hiring a professional may sound counter-intuitive. However, an outstanding accountant will often save you more than you spend on their services. A full-time financial officer is out of the question, but a few hours of a qualified individual’s time can highlight savings opportunities and save you a fortune in tax each year.