How Small Businesses Can Save Money – 9 Tips
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Don’t let your small business become a money pit. While the term usually refers to costly second-hand purchases like an old car or a rundown house, a small business can be just as much of a drain on your finances if you don’t approach it with financial planning and frugality in mind. This is true all the way from formation to post-startup establishment. You don’t want to find yourself in a situation whereby throwing money at every new problem just mounts even more costs.
Fortunately, there are many things you can do as a small business owner to cut costs—often in ways which benefit your business and staff beyond the financial. Saving money in business is about having an efficient, smartly run establishment that benefits all involved.
Read on for our tips on how small businesses can save money: learn about forward planning, marketing approaches, greener office management, and more.
How small businesses can save money in a nutshell
- Balance your finance plan with ambition and realism
- Replace costly traditional advertising campaigns with modern marketing techniques
- Align your sponsors with your brands and listen to your audience
- Outsource tasks to professionals where possible
- Practice negotiation skills and approach deals with the goal to save
- Review your need for an office and broaden your hiring practices to remote workers
- Reduce paper use and practice energy efficient methods in the office
- Be smart about your blanket orders
- Maintain a good budget by cataloguing your receipts and having a spreadsheet on the go for expenses
Make a realistic and waterproof finance plan
A good financial plan is all about balancing ambition with realism. You want your business to grow and to flourish, but you need to consider obstacles and survey the market critically. Find this balance and you can begin to prepare your finance plan.
Approach your overall finance plan in four stages:
Your strategic plan is where you momentarily put aside the numbers and plan out your broader goals. The idea is to clarify the resources you require to achieve what you hope to. Your strategic plan should include:
- Equipment needs
- Staff required (if any)
- Short and long term goals
- Office location and space
Financial projections plan
Here is where you counter the ambition of your strategic plan with some sober financial projections. Research the goals put forward in your strategic plan from a financial perspective. Make some predictions about what it’s going to cost to achieve these goals, while factoring in your projected earnings. Once this is done, you’ll be left with a realistic representation of your goals which you can begin to work towards.
Your strategic plan and financial projections will then be factored into your contingency plan. This is where you plan for high and low rewards periods (seasonal sales, releasing new features, increasing your staff) and potential financial threats to your business (weather fluctuations, political unrest, staff problems).
Your contingency plan should inform you on your need for cash reserves, while also preparing you for inevitable lulls. Consider also the assets you can sell for emergency funds or to break even during challenging business years.
Cut traditional advertising
Since their integration into the mainstream, search engines, social media, and websites have been usurping attention from traditional advertising methods. People’s consumption habits have changed and marketing techniques have evolved to keep up.
Traditional advertising pros and cons
Traditional advertising is the interruptive form of marketing which dominated the advertising scene until around the 2010s. The use of print advertising, TV spots, cold calling, and billboards were all intended to intervene in your daily consumption: you’re reading a magazine article and you turn to a full page ad before the article continues; an ad break delays the next plot point in the TV show you’re watching.
- Captive audience
- Memorable campaigns
- Potential to generate attention on social media
- Trends show a decline in success rates
Replacing traditional advertising with digital marketing
Avoiding these traditional advertising campaigns from your small business can be a great way to keep costs down. Instead of hiring actors to put together a costly TV spot that might only be shown late at night, consider a social media poll related to your product or service. Rather than a radio ad, why not a podcast endorsement or guest post on your company blog?
Digital marketing and modern advertising’s great advantage is that much of it can be done by you in your home or office, without the need to ask for permission. Where traditional advertising is interruptive, digital marketing is engaging and inclusive. A traditional ad forces itself upon the consumer; a digital marketing campaign targets the consumer based on their existing interests.
Get sponsors for events
If you’re planning an event to boost brand awareness, you’ll have to make peace with the financial investment. For physical events, venue hire, food and drinks, and equipment for speakers are just the basics. Online events can skip these expenses but to ensure engagement you may need bigger guest speakers and versatile marketing campaigns for a captive audience.
Sponsorship can help curb some of these costs. You may be able to secure free sponsorship by promising exposure and endorsement of the sponsor, but if you have to pay, the return on investment can make the price well worth it.
Make sure you go about getting the ideal sponsors for your event.
Align your sponsors with your brand and event
The better a match your sponsor is to your event, the more likely your event is to be a success—when the match is right, both parties benefit. Search online databases for specific sponsors, reach out on social media, and consult any useful connections you have.
Respond to your audience
Look into your existing audience on your social media channels or, if you haven’t built one up yet, the audience of your competitors and those interested in similar products and services. Who might they expect to see sponsoring an event like yours? Given that boosting brand awareness is all about gaining customers, you should be giving the attendees what they want.
It may feel like an oxymoron, but part of running your own business is accepting that you can’t do everything. If you have a staff you can disperse some tasks to your full timers, but with a small business you likely can’t cover everything. And hiring more full time staff is very expensive.
This is where outsourcing can help.
Consulting with external professionals to handle specialised tasks means ensuring you’re picking the right people for the job. You’re not seeing if you can handle it yourself or asking a staff member to put their responsibilities on hold and try their hand at something new.
Mistakes are costly
Outsourcing saves you money by reducing the likelihood of costly mistakes. Obviously hiring a professional is in itself an investment, but think of it this way: if you’re renovating a new home and you need to set up the plumbing and electricity, doing it yourself would initially be cheaper than hiring professionals, but what if something goes wrong? Accidents at this level could end up damaging your property or harming you, which could add thousands to your already costly job of renovation.
The same goes for your business. Whether it’s IT security, content creation, website design, or social media promotion, there are always professionals who will do the job better than you if you’re inexperienced. Outsourcing means thinking of the success in the long term, not taking shortcuts at the beginning.
Negotiate with vendors
If you’re new to running a business, you might be tempted to take the first price offered by vendors when you’re looking for equipment or software. This can end up being a costly mistake. Vendors are likely to hit potential customers with the highest price for their wares first, especially if they sense you might be new to the world of business ownership. Deal with vendors the way you deal with stall owners at your local sunday market. You might start to see some serious savings over time.
Boost your negotiation skills
From Antiquity’s ancient Greeks to today’s tech billionaires, humans have been negotiating for as long as there were things to negotiate over. This leaves you with a limitless well of resources to learn and become a better negotiator. Read books, watch seminars, consult with experts, practice on your friends and family until they can’t stand you anymore—get better at negotiating any way you can. Much as anything else, negotiation is a skill and it’s a crucial one for small business owners.
Since the beginning of the pandemic, working remotely has gone from a privilege reserved for freelancers and lucky digital nomads to a norm in the working world. It’s easy to see why: companies have massively cut costs by letting their employees work from home.
In Europe, the percentage of employees working from home doubled in 2020, while US employers saved an estimated $30 billion every day that same year while employees worked from home.
Decide if your company needs an office
In your strategic planning phase, ask yourself if you really need an office. Avoiding the cost of renting or purchasing an office space, managing your daily commute, and the many other things that go with having a physical working space can seriously cut costs which may never have been necessary in the first place.
If you’re running a software business or providing digital services, an office may not be necessary. Maintain with your employees regular online calls and strong communication channels and everyone can work remotely to great, cheaper success.
Broaden your hiring parameters
When you limit yourself to hiring within the vicinity of the office, or even within the country, you restrict yourself to a limited talent pool. Advertising roles for remote work and attracting people from everywhere means opening yourself up to the world and sifting through applicants with a huge range of experience and who are comfortable working remotely.
As shown above with costly mistakes, hiring the best may cost more initially but it ultimately means saving time, producing a better product, and providing better services. All of which see better returns on your investment.
Going green is no longer just an ethical choice for businesses—it’s proven to cut costs and increase productivity. Back in 2012, a study conducted by the UCLA and University of Paris-Dauphine found that eco-friendly companies are 16% more productive than other companies who don’t practice sustainable business.
When you break down some of the major eco-friendly shortcuts, it’s easy to see why this is the case.
Reduce paper use
Reducing paper use begins with giving a second-thought to your printing needs. How necessary is it that you have a hard copy of the document you’re about to print? Some other methods reduce paper use effectively and are easy to implement:
- Hot desking reduces the likelihood employees will load up their desks with stacks of paper
- Handy recycling bins mean any paper being used is easily recycled
- Paperless notes (apps, software) eliminate the need for notebooks
Ensure energy efficiency in the office
Conserve energy in your home and office and you’ll save on utility costs. Bills can be one of the sneakiest but most devastating blows to your annual budget if you aren’t constantly thinking about ways to be energy efficient.
Try the following methods and reap their benefits:
- Replace light fixtures with longer-lasting LED bulbs
- Use natural light whenever necessary
- Use laptops instead of desktop computers
- Encourage employees to set their laptops to hibernation mode after a few minutes of inactivity
- Hold meetings for employees to contribute their energy saving tips
- Ensure equipment is upgraded and high quality
Use Blanket Orders for Consumable Products
When you sign a contract for a blanket or standing order with a supplier, you’re signing up to repetitive orders of products with an unchanging price. Make sure that you’re clear on your order quantities, prices, period of time over which you will receive the order, and that any required licences are organised in advance.
Also, don’t be afraid to exercise your negotiation skills here, as mentioned above. Your blanket orders should suit your financial situation as much as possible and negotiation can help with this a great deal.
Regularly Revisit Your Budget
As a small business owner you may have to manage your budget by yourself, at least until you can afford staff to do it for you. This means keeping a close eye on expenses and checking your budget regularly so that no expenses come as a surprise to you later on.
Keep track of your receipts
Make sure you have organisation protocols for both paper and digital receipts. Request copies of each where possible and always note down what the point of the expense was. You might not remember why you kept the receipt for an expensive lunch six months ago, but you won’t have to if you write ‘Client meeting lunch’ on it.
Maintain a spreadsheet
Ideal for small business owners and those just starting out with entrepreneurship, a spreadsheet is the simplest and clearest way of keeping track of your budget. Access it on your phone and other devices to update it on the go, as soon as each expense is made.
Make sure your spreadsheet includes these columns:
This way, all the important details of each business expense are documented clearly and comprehensively.
Business ventures are costly, but they don’t have to be money pits. There are fortunately many ways small business owners can cut costs, especially in the early stages of formation. As we’ve shown above, it’s about planning ahead, hiring smartly, and employing cost effective marketing techniques. Hopefully our comprehensive guide on how small businesses can save money has demonstrated enough cost-conscious methods to help you approach your business venture with confidence.