The journey of entrepreneurship is filled with many hurdles and fewer victories. One of the most significant challenges is budgeting. As a business founder, you must ensure everything runs smoothly on a shoestring budget.
The initial capital you have managed to scrape together is miraculously meant to see you through the financial year. Yet there are so many bills that seek your attention, employees to pay, and overhead to cover while at the same time ensuring that you at least make a profit.
With the ever-increasing cost of living, saving as much as possible is even more critical. Here are a few tips that you can implement to cut costs.
1. Create a Budget
You have probably heard thousands of people swear that budgeting is a headache and you are not too keen on it. However, creating a budget and sticking to it is a skill you must master if you expect your business to thrive. There are many budget templates available online that you can download for free.
Additionally, having a budget ensures that:
- You can track your expenditures
- You have set aside enough funds for the month/ financial quarter
- You avoid unexpected debts
- You can identify what funds are misused and how to fix that
With a budget, you can make informed decisions regarding your company. This goes a long way in simplifying tasks for you and saving on costs.
2. Separate your Business Expenditures from your Personal Expenditures
This is perhaps an essential saving tip for founders. Every startup requires a hands-on environment, especially at the beginning. As a result, you might spend a lot of time working on your company, and eventually, the lines become blurred. It is therefore essential that your expenses and business expenses are entirely independent. By doing so, you can save money and time.
Here are some of the reasons why:
Startups often have access to low-interest loans that could go a long in helping you expand your business. Mixing your expenses might affect your credit and, subsequently, your chances of qualifying for the loans.
Having one account for all these expenses can negatively affect your credit score. Having separate accounts enables you to build credit on both, which is handy.
Accounting and Record-Keeping
In the beginning, it may seem easy to do everything together. However, as your business grows and you onboard more clients, things get more complicated. Therefore, keeping track of your business through a separate account is easier.
Should you outsource to an accounting firm for all your accounting needs, it is best to have a separate business account from your personal one.
There are expenses that a business owner can write off when filing taxes and get a tax break. This saving tip has saved many founders a lot of money. Unfortunately, writing off business expenses on a personal account is impossible without getting in trouble with the IRS.
To leverage these tax deductions, keep a separate business and personal account.
3. Ask for Discounts and Negotiate for Prices
As you are looking for clients and customers, so are your vendors and suppliers. Always ask for a discount when making purchases, whether big or small. Most vendors are open to offering discounts to keep you as a customer.
Alternatively, when purchasing things, ask for a lower price. All sellers are open to negotiating, especially if they want to establish a business relationship with you. This saving tip could end up saving you thousands if applied consistently.
It is also important to research and look at the prices offered by other suppliers before settling on one, so you have the leverage to haggle and bargain.
4. Have an Emergency Fund
Every startup has, at one point, had an emergency. While you cannot anticipate every possible outcome, you can be prepared. Always include a reasonable amount in your budget for the business’ emergency fund. This could very well end up being the saving tip that saves your business.
Any surplus income ought to go into the emergency fund. Continually reassess your income and business every few months to approximate how much should be in your emergency fund.
Emergency funds help you to:
- Cover unexpected fees
- Pay for unexpected damages
- Order more material if you run out ahead of time
- Avoid late fees and fines
- Invest in new opportunities as they arise
5. Outsource Tasks/ Use Contractors
As a founder, you require a lot of help to ensure all systems are running. While that is true, the cost of having an in-house team is considerably high. Using contractors ensures you get all the support you need at an affordable rate.
Various firms offer contractual services. It is also easy to find independent contractors that are within your budget. Enlisting these services saves you money that could be put to use elsewhere.
Most founders are very hands-on and want to solve every problem.
Unfortunately, this leaves you spread thin and often exhausted. While it may feel satisfying initially, it only puts you at risk for burnout. It also keeps you from focusing on avenues for growth. Studies show that most founders are distracted by tasks they can easily delegate.
Businesses with small teams also find themselves experiencing the same issue. To avoid this, identify the tasks your team can efficiently perform daily to ensure the business runs smoothly.
Make a list of responsibilities that the team could do. The duties that are challenging to the team can be outsourced. Outsourcing saves you time and effort. Outsourcing IT, accounting, human resources, and financial services is common and encouraged.
As the founder of the business, your vision is to keep growing and scaling the business. Saving money and cutting costs may seem impossible, but when you implement the above recommendations, you will likely save quite a bit.