Congratulations! You’ve managed to do what probably seemed impossible when you first started… launch a small business!
It might seem like you’ve made it and that the hard part is over. While that’s partially true, and getting off the ground tends to be the hardest part of making any small business venture a reality, it can be quite difficult to stay in business as well!
Nw your focus turns to turn a profit. Easier said than done, right?
Luckily for you, there are a few ways you can help yourself by cutting costs and boosting revenue. So, read on and find out how you can keep your small business in business!
Make sure your overhead is low
Your overhead cost refers to repeating costs that must be paid to keep yourself in business. Things like:
- Rent and utilities (if you have a location),
- Equipment upkeep and repair,
- Phone and internet,
- Delivery costs, and
- Commissions on sales.
These costs will never go away, but keeping them low will help you immensely, especially in the first few months of running your small business. Here are some ways you can do it!
If you’re a business that doesn’t need to rent a space like an office, you can go virtual! This will save you a ton of money on rent and utilities. This only works for certain businesses that don’t make or keep a product in-store. A warehouse may be cheaper for storing items and having your employees work from home makes it so you don’t need to rent out office space. A win-win!
Consider leasing equipment instead of owning it. In some circumstances, leasing equipment can be far cheaper than owning it, which should be taken into account before purchase. Whether you need a new oven for your pizza shop or a new printer for your office, leasing and renting equipment can be cheaper than owning it, and the upfront cost of such a thing is significantly less.
Be sure not to overstock items! Keeping your inventory reasonable is a great way to keep overhead low, as unsold goods have an extremely adverse effect on your business. If you have an item in stock that seems to not sell very well, it is probably time to stop stocking that item, or at the very least, significantly reduce the amount you have.
If you have a staff, you have that staff for a reason. Make sure that you aren’t taking too much of the load upon your own shoulders. You and your business will be a lot more productive if you’re focused on specific goals daily.
This will allow you to get more work of higher quality done every day, and it will also reduce the stress and isolation of running a small business on your own. Be sure not to hire new employees before you can afford it, however, and don’t hire too many as to keep that overhead low!
Of course, it should be stated that too many employees can be too high of a cost for many small businesses, especially early on. Even one or two employees can make a big difference, so hiring a small, capable team is much more effective than hiring a high number of individuals, and will save you money as well.
Be specific with your goals and actions
Your small business can’t become a corporation in one day. If you find a niche or specific item, service, or method that seems more effective than the others, you should lean into it.
For example, if you run a pizza shop and find that delivery is making you far more money than dine-in clients, maybe it’s time to trim some of the waitstaff and hire more delivery drivers. This will allow you to cut costs where they’re being wasted, and maximize profit where it’s being made.
This one might seem obvious, but it’s very important to make a habit out of taking the less expensive option. Not so much so that it harms your business, but enough so that you’re cutting costs when and where you can.
Here are some ideas to consider:
- Look for second-hand equipment, furniture, and vehicles (if needed). This will cut costs significantly, and as long as the equipment works, there’s no reason to spring for the brand new shiny item.
- You can also look for and take advantage of mail-in rebate offers for your supplies, which will significantly help soften the blow of equipment and supply costs. Coupons, clearance sales, and other money-saving opportunities should be taken advantage of every time.
- Always select the cheapest option when it comes to sourcing your goods. To stick with the pizza shop example, buy those tomatoes and spices wholesale as cheaply as possible. This will allow you a lot of breathing room when it comes to your other expenses. Practice this even with your less expensive costs.
This might all seem like excessive penny-pinching, but if you want to succeed in the opening months of running a small business, this is what it takes. The small amounts of money you save will quickly rack-up, and you can use them for other things that you would otherwise be unable to afford.
Keep personal and business finances separate
It might seem tempting when you’re in a pinch, but never, ever mix your personal accounts and your business accounts. There are many reasons for this, and all of them can spell disaster for you and your small business.
- First, keep these things separate for tax reasons. You do not want to overcomplicate your taxes or make it look like you’ve committed fraud. These can spell the end of your small business, so it is advisable you don’t mix personal and business financial situations for this reason alone.
- Second, it will make it much harder to run your business if you’ve muddled up your accounting records with personal purchases. Use your personal credit cards for personal purchases, and your business’s credit cards for your business purchases. Log each of these separately, and build a separate budget for yourself and your business.
You can manage this by opening a separate bank account for your business, from which your business will exclusively operate, and you will never personally take out of. It is very important to be responsible for this, as irresponsibility in this endeavor can spell doom for your small business.
Open a business savings account
Apart from opening a business account to separate your business and personal finances, you should also open a savings account for your business. This way, you can build up a cash reserve in case of an emergency.
Make sure to make regular deposits into this account. Even when you follow these and other money management tips very closely, the unexpected should always be expected. You never know when an accident will occur, an unforeseen expense will come up, or perhaps revenue will be lower than normal based on circumstances outside of your control.
For these types of situations, a cash reserve in a business savings account is vital.
One of the most important ways to save money is to know exactly what you’re spending it on. This way, you can see what you spend on average every day, every week, and every month. This allows you to set realistic revenue goals, and to know when and where you need to cut costs to stay afloat.
You should also, if you have multiple accounts for your business, track when and why you are taking money out of those accounts. This can reveal patterns in your business, good or bad, and help you identify what you’re doing right or wrong.
There are a lot of things you can do to help your small business stay afloat through the first few months and years after you launch. It is exceptionally important to track your expenses, reduce those costs, and be frugal and responsible with what money you do have.
The opening months and years of a small business can be up-and-down revenue-wise, so being responsible with your cash and having a pool of cash you’ve saved for tight spots or emergencies is invaluable.