Creative Ways To Keep Business Expenses Low As A Startup
Expenses are part of the story of starting and running businesses. Setting up a business can be seen as an exciting adventure as business owners create solutions to problems and earn profits as a result of it. However, it is also true that this quest of problem-solving and creating solutions can be expensive.
Business owners must, therefore, learn to adopt effective strategies that ensure that costs are streamlined to the minimum possible levels without compromising quality and the realization of the goals of the business. Many strategies can help businesses maintain low expenditure and be better positioned for profitability. Some of these include:
Planning and Prioritizing
In assessing the requirements for setting up or operating a business, it is normal for business owners to set high budgets initially. Consequently, the right approach must always be to develop a plan that can allow the business to operate effectively with the minimum requirement that can deliver the best result. To achieve this, the business owner needs to create a list of all items the business needs to start and operate, such as basis assets as well as operational and overhead costs.
The budget must account for all the necessary business requirements, the cash flow statement to track the financial health of the business and the income statement which will capture the revenue and expenses of the business, must all be available and adhered to. Having all of this planned out ahead of time will ensure that the business is sustainable at this level and that all upfront costs are adequately planned for and managed.
Track Operations
It is good practice for businesses to keep track of all expenses and adhere to their set budget. Keeping proper records allows the business owner to eliminate unnecessary expenses. These records are also necessary for business audit, tax filing and can serve as evidence in the event of a legal tussle.
Careful Hiring
Planning for human resource and staffing cost is a key component of the overall business planning strategy. The business plan usually identifies and outlines the staffing needs of the business, detailing the current team as well as the potential gaps needed to be filled. It allows the business to correctly identify the most suitable talents for proper utilisation of the human resource and its associated expense. It also allows the business decide whether to adopt models and strategies such as engaging contractors or outsourcing certain areas of the business processes to third parties and minimising payroll commitments to the barest minimum while ensuring that the business grows to scale.
Align Cost with Usage
The business operation may require a number of essential services such as internet, telecommunications, cloud storage, bookkeeping, accounting or legal support – via monthly/ annual subscriptions or retainers. It is essential to review these subscriptions to determine whether they are adequate for business needs. If the business is paying for a capacity beyond what is regularly consumed, downsizing to a cheaper plan will be more cost effective to the business.
Cut back on paid software
There are open-source free alternatives to almost any business utility software product available for businesses looking to streamline cost achieve their goal. Thus, unless a specific software is absolutely crucial for keeping the business running smoothly, it can be replaced by a free or close to free alternative. The same goes for other business inputs.
Upfront deductions
With well-defined expenses, a small business owner could write off a significant amount of costs and organisational expenses with proper tax filing. Some of the potential deductions include taxes, asset depreciation, as well as salaries and benefits. It could be helpful to engage the services of an accountant in order to make sure the books are clean enough to be able to take advantage of every deduction possible.
Bulk purchases
While it is important to keep costs lean, there may be times where buying more upfront is the cheaper option on the long run. In the day-to-day operations of a business, items such as software license or subscription, office supplies, product supplies, and or service offerings acquired in bits and pieces can easily build up over time. While it is good to be cautious and not buy an excessive amount to tie down capital, a larger purchase can be advantageous in the long run, especially if a significant discount is achieved.
It is important for businesses to conduct proper market and price analysis to compare prices, test products, and plan out the use cases for procuring items for the day-to-day operation of the business. Building strong relationships with vendors and service providers can also forge trust and create understanding for discounts.
No matter the cost-saving approach a business owner chooses, proper business planning is often the best way to reduce costs. It acts as a roadmap, a way to test ideas, and ensures the chosen approach is followed tactically and is yielding the expected results. The business owner can know what works for the business and ways of exploring future strategies to minimize expenses as the business scales.
