A Savings Guide For A First Year Business Owner

  By Eric Williams

Financial trouble is one of the biggest killers of small businesses. In fact, 29% of small businesses fail due to running out of money; ultimately, only 78.5% of small businesses survive their first year.

These statistics can seem pretty depressing if you’re currently trying to get your business off the ground. However, by following the right advice and making sound financial decisions, you can avoid the common pitfalls faced by many small businesses.

Below, you can find the top money-saving tips to help you start saving as a small business owner. By combining the strategies that work best for your own business, you can strengthen your financial health and improve your chances of long-term success.

1) Write a financial plan and budget

Perhaps the most crucial step in your journey towards financial stability is drafting a financial plan and budget. Without proper planning and budgeting, how will you know when you’re on track to meet your goals or heading towards financial ruin?

In your financial plan, you’ll need to write an overview of your current financial situation and make projections for your business’s growth. Seeing where you are now and where you’d like to be will help you create a strategy for achieving your financial goals. In addition, a solid business plan and financial plan will make you appeal to investors, which can help you gain more financial stability.

Key documents you’ll need in your financial plan include your cash flow statement, profit and loss statement, income statement, sales forecast, break-even analysis, and balance sheet. Learn more about these documents here.

Your budget will form part of your strategy to achieve your financial goals. Use your financial plan to work out how much you can afford to spend each month based on your income, fixed costs, and variable expenses.

2) Build up an emergency fund

Another important part of your business’s budget is your emergency fund. As a small business owner, you need to prepare for unexpected costs by building up your savings.

For example, if you’re suddenly faced with a surprise bill or broken equipment, this probably won’t be covered by your regular budget. However, if you’ve set aside an emergency fund, you’ll be able to deal with these unexpected expenses without throwing your budget and financial plan into disarray.

3) Apply for small business grants

Small business owners can apply for various loans to help them kickstart their business, but being in debt can be nerve-wracking when your business is still in its early stages.

Fortunately, you may be able to apply for a small business grant. The thought of free money is obviously very tempting, but the competition is fierce for many of these grants. Also, you may have to start a long application process and jump through many hoops to have a chance of securing one of these grants.

You can find small business grants at federal and state levels by looking at Grants.gov, the Small Business Administration, and local programs. Companies like FedEx and Walmart also offer grants to small businesses. Often, your business will need to be particularly innovative or committed to a social cause to collect cash from these grants, but woman-owned and minority-owned businesses can be eligible for additional grants.

4) Use free online tools

To stick to your budget and save money wherever possible, it’s a good idea to take advantage of the wide range of free business tools available on the internet. No matter what you’re looking for, you’re bound to find a free online tool to suit your needs.

One of the best ways to save money in your first year of business is to use a free website builder instead of hiring a web developer to create your website. Free website building tools are incredibly easy to use and have so many templates to choose from. This means you can easily set up your business’s website without any prior experience.

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5) Eliminate unnecessary expenses

This piece of advice may sound obvious, but you’d be surprised to learn how many people don’t evaluate the value of their expenses and end up wasting money on unnecessary costs.

To save money, you should regularly go through your expenses and determine if you’re getting your money’s worth out of these transactions. As an example, you could use an ROI calculator to work out exactly how much value you gain from your investments. Then, you can identify the expenses that don’t bring value and cut them down or eliminate them. This exercise could save you a significant amount of money once you add up all of the small savings.

6) Negotiate with vendors

If you find yourself struggling to pay for all of your supplies, then you should try to negotiate lower prices before finding new vendors. Staying with your current suppliers and negotiating a better price can save you both time and money, so it’s definitely worth a shot.

Ultimately, your vendors won’t want to lose a long-term customer, so they may be more willing to negotiate on prices than you might think. In addition, you could trade goods or services with other businesses in exchange for what you need. Visit the National Association of Trade Exchanges (NATE) website for more information on trading and bartering.

7) Cut down your marketing budget

Marketing is extremely important, but you don’t need to spend a fortune to achieve the best results. In fact, spending on traditional advertising formats like TV, newspapers, and radio is projected to fall by 20.7% worldwide, whereas digital advertising is both very popular and much less expensive.

Therefore, instead of investing in paid advertising and traditional media, you can cut costs and start saving as a small business owner by focusing on digital marketing. In particular, social media marketing is extremely effective, and you can also do it yourself. Choose the right social media platforms for your business (e.g., Facebook, LinkedIn, Twitter, Instagram) and make sure you post regularly to maintain engagement.

Writing informative content for your target market is another effective digital marketing strategy you can do yourself, and you can share this content on your social media channels to highlight your business’s expertise. Additionally, if you’re familiar with SEO, you can use SEO strategies to improve the ranking of your website and gain more traffic.

8) Do more research

Another common issue faced by small business owners is a lack of market and product research. According to a study by CB Insights, around 42% of small businesses shut down because there’s no market need for their products or services. Therefore, you must research the market to ensure your business fills a useful niche for customers.

If you’re developing products, it’s also vitally important that you conduct adequate product research before going ahead with an idea. Although product research and development may be expensive, it’s better to ensure there’s a genuine interest in and use for your product among your customer base before you spend money on production and marketing. Overall, conducting adequate research will help you save time and money in the long run since you won’t be desperately trying to sell unpopular products.

9) Outsource work

As your business grows, you may not be able to manage everything on your own or in your small team anymore. At this point, you may think it’s time to hire some full-time employees, but before you make that decision, you should consider whether these tasks could be outsourced instead.

Hiring full-time employees is incredibly costly, but with independent contractors, you won’t have to worry about paying a regular salary and providing workplace benefits or office equipment. Instead, you can hire contractors and freelance workers to handle tasks as and when they’re needed, and in the end, you’ll only have to pay them for their billable hours. Websites like Fiverr are fantastic for helping you find knowledgeable freelancers for all kinds of temporary work.

Another option is to hire interns. By providing an internship program at your business, you can save on hiring costs and also give young people a great opportunity to gain some business experience.

10) Work from home

Without a team of full-time staff, it makes sense to forgo an office and work from home instead. As a result, you’ll save a huge amount of money on rent, utilities, and office supplies, and you’ll also save plenty of time and money by avoiding the daily commute.

To help you set healthy boundaries between work and your personal life, you should create a separate office space in your home rather than just working from anywhere. Having a separate office space will help you avoid stress and burnout while also helping you to focus more during working hours.

11) Write off your business expenses

Understanding tax deductions can help you save more money as a small business owner. Anything you spend related to your business can be written off for tax purposes, which will lower your overall taxable income and save money.

For example, if you need to travel for business purposes, you could write off your travel expenses, accommodation costs, and even the cost of your food. Additionally, if you work from home, you can write off a portion of your utility bills and perhaps even part of your rent or mortgage as a business expense. Make sure you look into what you can deduct from your taxes as a business expense to maximize the amount of money you save.

12) Buy second-hand equipment

When you’re just starting out with your business, an easy way to save money is to only buy what you need and stick to second-hand items. You don’t need to immediately buy a wide range of expensive gadgets and supplies to become successful! Check out what’s available on sites like eBay, or ask your friends and family if they have any old items you could use.

13) Get business insurance

Although you may think you’re saving money by holding off on getting insurance, you could end up in severe financial trouble if you remain uninsured. If you face a cyber-attack or an employee is injured at work and you don’t have insurance, you could end up costing your company thousands of dollars.

The main types of business insurance you should look into are general liability insurance, commercial property insurance (if you have an office or store), workers’ compensation insurance (if you have employees), and cyber liability insurance. For small business owners, cyber liability insurance is particularly important since 90% of data breaches affect small businesses.

14) Go paperless

Going paperless will help you save money on office supplies. Although this seems like a small and insignificant change, it’s important to scrimp and save wherever you can in the early days of your business.

Instead of using paper to communicate and store documents, you can switch to digital communication and cloud storage solutions, which you can often find for free. Furthermore, if you invest in accounting software, you can send and store invoices and receipts digitally, saving you both time and money.

15) Grow your network

Finally, if you’re still struggling to lower costs in your first year as a small business owner, you should try to grow your network and meet other business owners in your industry. By networking with people who were once in your exact position, you can gather helpful, relevant advice to give you new ideas on saving money.

To start networking, you can look for meetups and conferences in your local area. Or, if there aren’t many in-person events near you, then you can easily join various groups and forums online. In addition to helping you save money, networking will allow you to make connections and partnerships in your industry, which can boost your business’s reputation.

Final thoughts: Achieving success as a small business owner

Getting to grips with your finances is one of the hardest tasks when starting a new business. Through poor decision-making, a failure to budget properly, and a lack of experience, many small business owners don’t make it through their first year, and up to 50% fail within the first five years.

However, there is hope for budding entrepreneurs. By asking for advice from other business owners and following the money-saving tips listed above, you can defy the odds and start saving as a small business owner. Ultimately, strong finances will give you the best chance of succeeding.

This article A Savings Guide For A First Year Business Owner originally appeared on Rick Orford – Invest, Earn More Income & Save Money.