Top tips for cutting costs when launching a business
Thursday 19th January 2023
The early days of launching a business can be expensive. The list of what you need to buy may seem endless and unless you have run a business before you may lack the necessary experience to navigate this stage without spending too much money.
Closely monitoring your profit and operating costs is one way to help make informed decisions but there are a number of other strategies you can use to minimise expenses and maximise the chances of creating a sustainable business.
As saving costs in the current economic climate is essential to success, we have put together a number of cost cutting tips that we hope will help:
Technology
You can save a lot of money and avoid the expense of hiring experts by using modern technology. Many tools are designed to deal easily with the time-consuming tasks of running a business, this will not only save you money but save you time, leaving you free to focus on more productive areas.
Learning how to use social media as a marketing tool and embracing online marketing will reap rewards; it is cheaper than traditional marketing methods and has an extensive reach which can be very effective if used properly.
There are tools that can help you to build your own website enabling you to communicate with customers and spread your message during the early days of your launch, saving money on web designers while cash is in short supply.
Many software tools are also now available to help with bookkeeping and accounting.
Outsource
A wide variety of specialists are available to help set up your business cheaply, taking on work that is difficult for you to do. Many specialists will charge by the hour so you only have to pay for what you need.
Don’t always buy new
Depending on your business requirements it is likely you will need to invest in things like machinery or equipment at some stage. To avoid spending too much money in the early days, look to online sites like eBay, or Facebook Marketplace for used machinery and equipment.
Vehicles and machinery can often be leased; this could be a cheaper option. Leasing also means that breakdowns are covered and you won’t need to part with large sums of money, avoiding high loan repayment terms if you have to borrow.
Think before you buy
Before you make any purchase, think first - do you really need it at this moment? In these early days it may be possible to manage without and if you’re not sure then borrowing or hiring for a while may be a good idea to see if you really need it.
Minimise overhead expenses
Ongoing overhead expenses can be difficult to control and will affect your profit and your cash flow.
Look at your office space, a smaller working area will be cheaper and there are now alternatives like co-working or sharing office space to save money in the early days.
Co-working options often provide open spaces with plenty of seating and if you’re lucky, you may find some that are free, including coffee shops that allow you to work there for just the price of a cup of coffee. This not only saves money but provides opportunities to meet other people, in particular entrepreneurs in your local area.
Sharing office space will cost less than being a sole occupier and you may find a local company with a spare room that you can use for a nominal fee. As many employees can now work remotely you may not need office space at all, just an area to meet up occasionally.
Hire only who you need
Employees are expensive so from the start avoid building a team that’s too big. Hire only who you need now until you have a clearer idea of the direction your company is taking.
Budgeting and forecasting
Create a budget as this will enable you to see where your money is going and will highlight areas where costs can be saved.
Create a sales forecast and frequently compare your spending and sales to your forecasts. A regular review of your finances will help keep control of cash flow.
Check your inventory
Stock costs money and there is a balance between having too much and too little as there are costs associated with both. Look closely at your sales, when do they peak and when do they dip? This can help you to work out how much stock to hold and avoid wasting money on either storage for too much or for deliveries and lost sales with too little.
Keep on top of your finances
Always pay your bills on time, it can be expensive paying late fees or interest charges that you hadn’t planned for.
Keep track of your invoices and make sure they are paid on time, sending reminders if necessary. Cash flow is extremely important to new businesses and though a product may be selling well, if the money isn’t coming in on time you can find yourself quickly getting into financial difficulties. Set up a process to make sure you get paid on time and in full.
Go Green
Now is the time to be as sustainable as you can, start as you mean to go on. Use less paper by invoicing online and keeping all your records stored digitally, this will save on paper, printer ink and stamps.
Tax write-offs
As soon as you start trading get in touch with a tax advisor and find out what you can write off against tax. The sooner you are aware of this the better - take advantage of as many write-offs as possible!
