Top 10 Ways to Save Money in Your Startup
Contrary to popular belief, you don’t need hundreds of thousands of dollars to start a successful business. In actual fact, over 80% of new businesses that ultimately succeed started out with a lot less money – even as little as $10,000!
If you started your business with very little cash and without taking on investors, you have what is known as a bootstrapped business. While you have the benefits of not having to give away any equity in your business and won’t have an investor breathing down your neck, cash will be tight and you’ll need to preserve as much as possible to grow your business.
A business loan is a good idea, as you’ll retain your independence and full control of day-to-day operations. There are also alternative funding solutions available to new business owners, including personal loans from Lending Club and ‘Guide-to-Lenders’, and even business credit cards from Credit.com.
What if my business is too young to qualify for a loan?
If your business is still too new to qualify for a loan, you should focus on saving money and getting into bootstrap mode and do your best to reduce business expenses.
Here we’ll give you some handy cost saving ideas for companies and tips on how to save money and cut costs when starting your business:
1. Delay getting office space
Depending on your particular business, if suitable, you could and should start out by working from home. This will surely reduce business expenses as you won’t be wasting your money on office space. Even if you have staff members, you can allow them to work from home too, using smartphones, video and high-speed internet to communicate and work productively. Working remotely has become the norm for both large and small-to-medium businesses starting out.
2. Buy second-hand equipment
Although it’s tempting to buy fancy new equipment or machinery for your new business, one great cost cutting strategies for companies although hardly spoken of is to buy second-hand equipment. It’s more than okay to buy used equipment that’s in excellent, functional condition, and no one has to know!
One way to find such equipment is to contact larger businesses in your industry. They may just have equipment to sell you at a discount or even to lease to you. Try to negotiate the best price possible and make sure it’s in good condition so that it’ll last you a good long while, or at least to last while you’re in that unstable start-up phase. You could also consider getting a business equipment loan or equipment leasing.
3. Barter, barter, barter
Scratch my back and I’ll scratch yours should be the motto of every entrepreneur. When cash is not yet flowing, you should try exchanging service for service, product for product with other entrepreneurs in a similar position. One of many tricks you’ll need to master to survive as a new business owner.
4. Hire part-time or outsource
Don’t worry about hiring full-time staff members just yet. It’s perfectly acceptable to hire part-time workers or even to outsource where possible with freelancers or companies. For example, when you’re starting out, you won’t need an in-house accountant or bookkeeper, you can easily outsource to an accounting firm (and therefore, lower your expenses) and even use accounting software, such as Quickbooks, Xero, myob and Zoho, to minimize accountant consultation fees.
You’ll want to make sure that you effectively forecast your cash flow to better budget and make better business decisions. With the help of Quickbooks you can also do this, or you could use a more specific cash flow forecaster such as Float.
5. Use free software and tools
There are loads of free software downloads available for EVERYTHING. From graphic design to marketing, to customer relationship and time management tools, it’s all out there.
You won’t miss any premium features when you’re starting out, and as you grow, you can always upgrade. There are also many free ways to market your business online, most notably using social media, which will also save you thousands in marketing costs and give you access to a large, relevant consumer base.
6. Negotiate vendor discounts and deferred payments
Practice your sales skills by negotiating discounts from vendors. If you don’t ask, you won’t get. You’d be surprised at just how much you can negotiate and lower payments this way, don’t be shy to ask, it’s business.
You should also try to negotiate deferred payments so that you can get some cash in before having to pay out.
If you’re wondering how to reduce cost in business, another great way is buying in bulk in order to earn large discounts from suppliers. This, however, only works if you’re buying goods that won’t expire and if you have room for storage. Be sure to carefully weigh this decision up before bulk-buying.
7. Invest in interest-bearing accounts
Early-stage businesses may find it useful to reinvest any profits into their business bank account, better yet, in an interest-bearing account, instead of spending money on expansion.
This strategy is known as ‘buying time in business’ and is relevant when you’re waiting to become eligible for a business loan.
8. Negotiate inventory management
Instead of holding inventory or stock yourself, which would of course require a costly rental space, you could negotiate with your suppliers or distributors to ship directly to your customers.
This would cut huge costs and cut out a whole lot of paperwork. Of course, it will cost you extra, you’ll need to weigh up the specific costs for your business to see if this option will reduce your business start-up costs.
9. Hire strategically
You don’t need to hire the best of the best or the most experienced employees. You can find talent and hard workers in surprising places. The important thing is to find hard workers, one’s willing to prove himself with demonstrated ability to work and please.
Aim for staff members with moderate skills but with lots of potential that you can groom. You could even start with interns to do basic work and grow from there – a sure way to reduce business expenses!
10. Incentivize team members with equity
The last tip we have to reduce business expenses is that you could offer to partially compensate employees with equity instead of cash only, which will save you from both digging into your cash flow and will also have the benefit of motivating staff members.
While you’re waiting to become eligible for the business loan you need to focus on growing your business. Spend the time focusing on saving money and bootstrapping your business. You’ll find that it’s easier than you may think to cut business start-up costs!
What if I can’t qualify for a business loan right now?
When you apply for a business loan with Become, even if you don’t qualify for a loan, each business owner will receive a unique dashboard with:
- The reasons you didn’t qualify
- Information to help your business grow and become more qualifiable for a loan
- As soon as your business has improved, you’ll be notified with which of Become’s partners you can qualify with
- You can then choose whether or not to apply – easy!
- It’s obligation free and will help you on the right path to growing your business
See who you can qualify with and receive your dashboard lending profile by applying here:
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