Raising adequate funds is one of the biggest challenges facing entrepreneurs. As a small business owner, you’ve to make do with do with a shoestring budget.
The good news is lack of adequate capital doesn’t mean you can’t run a successful business. As long as you have got a quality product with strong market demand and you can build an effective team, you can transform your small business into a large company.
What’s more, you can always cut expenses to keep your overheads low.
Keen to learn how to pull this off? Keep reading.
Build a Great Product or Service
When you’re in the early stages of starting a business, cutting expenses is probably the last thing on your mind. All your focus is on creating an amazing product or service before you take it to market.
You might not know it yet, but building a great product is the first step to cutting some future expenses. Wondering how this works out?
You’ve certainly heard of the common phrase, “a great product sells itself.” This means that with a great product on your shelves, you don’t have to spend a lot of money marketing and advertising it. Once it hits the market, word of mouth marketing alone will be enough to fuel sales!
Choosing Your Funding Method with Cost Cutting in Mind
Are you among the 21.9 percent of entrepreneurs who start up a business using their personal finances? If yes, you’ve just saved your business from unnecessary expenses in the future.
You see, there are a couple of strategies you can use to fund your business. Some of these strategies can set you up for additional expenses.
For instance, if you opt to go in for a business bank loan, you’ll have to start repaying it together with interest. Interest payments are an expense. They take money out of your business. And if the business doesn’t fire up quickly, you could end up using capital reserves to service the debt.
On the other hand, using your own money doesn’t come with any expense obligations. You don’t have to pay yourself back until the business is steady.
Another funding strategy without future expenses is equity financing. When you give out a stake in your business in exchange for a capital injection, you have no obligation to repay the money. In fact, if the business fails, the equity investors will have to write off their losses.
A Minimalist Office Saves Money
When you’re ready to set up your business, one of the first things you’ll do is set up an office, shop or other premises. Although this is also among the most capital-intensive tasks, it also presents an ideal opportunity to cut expenses.
Don’t be like those startup founders who go all out for a plush office, high-end furniture, and fancy office equipment and appliances. Sure, we would all love to have office conversation by the side of a fancy water cooler, but such items aren’t necessary when you’re a small business running on a tight budget.
Embracing minimalism in the office will help you cut back on startup costs. Just begin by purchasing essential office equipment. You can always upgrade later on when the business is pulling in good revenues.
Take Advantage of Tax Breaks
Paying business taxes is mandatory.
However, governments also provide tax breaks that can help lower your tax expenditures. For example, the newly-enforced Tax Cuts and Job Acts enables small business owners to deduct 20 percent of their net income. Other deductions include:
- Cost of office equipment and supplies
- Cost of software and electronics
- Mileage
- Cost of meals and travel when on business duty
- Insurance premiums
To qualify for these deductions, keep accurate records of receipts.
The same applies if your business has an overseas subsidiary. If you have an extension of your small business in the UK, for instance, there are tax breaks you could qualify for. Especially if the business is involved in research and development, you could qualify for R&D tax credits through the Home Revenue and Custom’s enhancement and surrender rates. Be sure to learn more about these rates and establish whether your business qualifies.
Outsource Some Functions
Perhaps you’re wondering, “Why should I outsource my business some tasks when I can do them in-house?”
Sure, outsourcing costs money because you have to pay the service providers. It might light look you’re making an unnecessary expense right now, but, in truth, you’re indirectly saving your business money.
Outsourcing enables you to access technical expertise in areas you might not be good at, such as digital marketing. When an expert is handling your digital marketing, your business will likely sell more product, which translates to higher revenues. In the long run, profits will offset the cost of the service.
Build Your Team Wisely
You may have started your small business as a one-man show, but as it grows, you’ll need to build a team of employees.
Know what that means? More expenses!
Employees command regular wages, bonuses, and other forms of compensation, so you must be smart with your hiring strategy. If you hire more people than you need at a given time, your labor costs could spiral out of control.
Evaluate the manpower needs of your business and fill those positions with people who have the ability to do multiple roles. Instead of hiring a sales rep and a customer service agent, for example, you can hire one person to hold both roles — at least for now.
Cut Expenses and Help Your Business Thrive
When a business is new, it’ll suck money out of your pocket.
While this isn’t out of the ordinary, it’s your ability to cut expenses that will ensure you don’t burn through all the cash. Luck for you, we’ve shared some of the tops tips you can use to keep those expenses in check.
Stay tuned to our site for more insights on business finance.
