4 Ways to Save Money in Your Small Business

When starting a small business, a lot of entrepreneurs often make the mistake of overpaying for certain expenses. To be more specific, most small business owners spend more than twice their initial expected cost just within their first year of operation.

Small business finance

photo credit: Pexels

This overspending led to a large chunk of small businesses failing not long after they started simply due to the lack of funds. Statistics from the Small Business Administration Office of Advocacy revealed that only 80 percent of small businesses were able to survive during the first year of operation.

That might sound healthy, but after a 5-year mark, only half of those businesses survived. This is why having enough funds and using those available funds efficiently is important as it helps small businesses get off the ground and avoid closing up shop due to lack of funding.

Luckily, there are several ways you can save money to avoid those pitfalls and keep your small business afloat. Some include:

1. Outsource Certain Parts of Your Business Operations

Labor costs normally take a huge chunk off a business’ budget, especially if it’s just starting out. On average, payroll alone can take around 15-30 percent of a business’s gross revenue while barely managing to stay on budget. Of course, this can vary from industry to industry, but the consensus is that labor costs can largely affect a small business’s ability to stay in operation.

This is mainly because many businesses end up paying more for labor than what they can earn, explaining why a lot of small businesses fail within their first few years.

To circumvent this issue, you can choose to outsource certain parts of your business operations and employ the expertise of professionals but for a far more affordable rate. Basically anything that falls outside of your business’s core operations.

You can outsource tasks like marketing, HR, IT, and a whole lot more so you can reduce your labor costs and allow your in-house staff to work on the focal points of your business.

2. Operate a Remote Team

Another excellent way of saving money in your small business is to operate a remote team. As opposed to the traditional method of hiring more in-house staff, having your employees work from home allows your business to benefit from reduced overhead. In fact, a study revealed that businesses can save up to $11,000 per employee on average.

This is because businesses can cut down on several expenses such as utility bills, real estate costs, furniture, heating and air conditioning, and other stuff that will keep an office operating.

Apart from that, it also introduces your business to an even wider audience, especially if you have employees from various strategic locations as they have better information about their area’s culture and customs.

3. Cut Down on Recurring Expenses

There are several ways to cut down on your business’ recurring expenses. Going paperless, cutting down on utility bills, and buying second-hand equipment are just a few of them. You have many other options to choose from. You should analyze what your recurring expenses are so you can have an idea of which among them can your business do without.

For example, if you’ve laid off a few employees and aren’t looking to fill their empty positions soon, do you still need those extra phone lines? If you’re paying for each line on a monthly basis, then you’re better off dropping the ones you’re no longer using.

Securing data on cloud network

4. Go Cloud

These days, almost every business that has a website goes cloud. This is particularly true among businesses whose operations require the use and installation of expensive hardware on-site. By simply going cloud, they can save a lot of money by just ordering storage or data use services through the cloud for very affordable fees.

Also, instead of opting for traditional phone calls, small businesses can save even further by switching to VoIP (Voice over Internet Protocol). But how does VoIP work for business? With VoIP, businesses can enjoy immediate cost savings, especially when making long-distance calls, since calls are made over the internet and don’t incur any expensive long-distance rates.

It gets even more beneficial for small businesses, with research revealing that roughly one-third of all businesses use VoIP systems, most of which are small-scale businesses. Since VoIP providers charge their users a monthly fee instead of a duration-based rate, small businesses are able to allocate their funds to other aspects of their business.

Some providers even offer free services, albeit with fewer features than their paid counterparts. Still, this significant cost-saving opportunity is highly beneficial for small businesses, especially those just starting out.

Watch Your Small Business Grow

There’s no denying that starting and running a small business is a costly and risky endeavor. Without a sufficient cash flow to sustain a business for the long term, it’s easy to see why lots of small businesses don’t even last long.

Luckily, you can avoid that and more by simply learning how to save money in your small business so you can have enough funds for your operations. There are still plenty of money-saving methods you can apply out there, but these four solutions are a good place to start.

Shares

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.