7 Ways to lower Startup Costs for Businesses
Did you know 8 out of 10 small businesses fail within the first 18 months?
Many people have a great business idea, but they don't consider business startup costs when planning their business.
Key Takeaways You Will Get From This Article
1. Always know what kind of costs you will have when you launch and run your business.
2. When starting a new business always be rent concious, utilize various ways to save energy, leverage freelancers and contractors, make your business a place your employees want to stay, allow your staff some work-from-home days, be sure to cancel services or tools you never use, and leverage high-tech software for improved productivity.
3. Improper cash-flow management can snowball and affect your ability to pay for other business expenses.
4. Understanding and preparing for your business expenses will help you launch a business successfully.
Most new business owners don't consider startup costs like employee benefits or the many one-time expenses during a launch.
These businesses fail not because they didn't have a solid business plan or a sales strategy to increase their sales profitability or manage their business expenses.
Instead, these businesses ignored startup expenses, their financial health took a significant hit, and they soon couldn't manage their business costs and other expenses like utility bills.
To be a successful start-up or small business doesn't mean business owners have to be financial wizards.
You have to be aware of and keep track of expenses, especially as a new startup.
There are many ways to cut costs that you can start working towards right now (even if you're not an economics expert).
Let's examine 7 money-saving tips business owners can use that will help them maintain profitability.
First, Have An Idea Of Your Business Startup Costs Before You Launch
Before we get into cost savings, you should know what kind of costs you will have when you launch and run your business.
Before your business even opens its doors, you'll have expenses.
Understanding and preparing for these expenses will help you launch successfully.
Calculating startup costs helps you:
- Estimate profits
- Secure business loans
- Conduct a break-even analysis
- Attract investors
- Save money with tax deductions
Your business will likely be one of the following:
- brick-and-mortar business
- online business
- service provider
Each business type will have different startup expenses depending on your business type. However, there are typical startup costs you'll have to account for no matter what.
The following list compiles a few of the most common expenses.
If we've missed any, make sure to add any unique to your business:
- Office space
- Office supplies
- Equipment and supplies
- Market research
- Printed marketing materials
- Making a website
- Misc. variable costs
- Travel expenses
- Payment Processing
- Licenses and permits
- Lawyer and accountant
- Employee salaries
- Advertising and marketing
1. Get on the Energy-Saving Train
The idea of saving energy has become somewhat of a broken record.
Everyone knows it's important, but the thought sits in the back of our minds, and we don't act. But what if saving energy could significantly save your business money?
Try double-pane windows and light-blocking blinds in your office space.
Use power strips for all your appliances so they can easily be turned off when you shut down for the day.
Some energy-saving initiatives qualify for tax credits, so there's another incentive right there to save energy!
2. Be Rent-Conscious about Your Space
Start-ups and small businesses all across the nation are cutting down on the square footage of their spaces by leveraging multipurpose conference rooms and co-working spaces.
Not only can this save on energy expenses and furniture costs, but more collaborative workstations help your employees be more innovative and productive!
3. Leverage Freelancers and Contractors
According to a 2014 study done by the Freelancers Union, 53 million Americans are independent freelancers and contractors.
Independent workers are more affordable than your traditional employee because you don't have to provide healthcare coverage or other benefits that quickly add up.
Leverage freelancers and contractors where you can to help cut back on expenses.
4. Make Your Business a Place Employees Want to Stay
Pew Research has shown that 18-35-year-olds (yes, even back from 2000 when Gen Xers were part of this age range) are more open to new job opportunities.
This "job hopping" is because people believe they'll get better opportunities and more money someplace new than if they stayed at their last place of employment.
To combat this, invest some time and money up front to make your office space fun and engaging (snack bars, pool tables, company outings, etc.) and reward your employees for their loyalty with quality benefits and compensation.
5. Give Your Staff Work from Home Days
Thanks to technology, gone are the days where your employees had to be in the office five days a week.
By giving your staff opportunities to work from home, your employees get a chance to save on gas and work from the comfort of their own home, and you get to save a bit on energy costs.
6. Cancel Services or Tools You Never Use
Tools and services can weigh down your business financially, especially when you're investing in more than you need to.
Take some time to review all the tools and software you have and get rid of the ones that are barely ever used to give your financials a bit more breathing room.
7. Leverage High-Tech Software for Improved Productivity
Legacy software can drag your employee productivity (time is money, after all) and your business down.
If you can, replace older software with high-tech solutions that allow your employees to work more efficiently.
There are even free tools like Slack that increase productivity, communication, and collaboration across your organization, even when employees aren't in the same room together.
BONUS: Manage Cash Flow
Sometimes a lack of money isn't the issue.
Instead, the issue could be recouping payments from clients who haven't paid for your products or services.
It's impossible to avoid clients who take too long to pay their dues.
If you cannot manage your cash flow, it can snowball and affect your ability to pay for other business expenses.
This is why you should always put your invoicing policy in writing.
Present your payment terms and mention any penalties for delayed payments.
Doing so enables you to get paid on time and manage cash flow seamlessly.
You can also consider offering discounts when clients make early payments.
We Help Small Businesses Lower Costs for Improved Profitability
Launching a new startup can be an exciting venture.
Don't get too caught up in the excitement that you overlook how much you're spending or how much capital you need to start.
Cash flow is the lifeblood of any business, and not having enough can be a disaster for your startup.
At Electronic Merchant Services, we provide an innovative suite of business solutions, including payment processing and merchant products to increase your business's financial well-being.
Contact us to learn more about how we can help your business save on start-up costs and succeed, or request a quote.