Spending money effectively and efficiently should be among the top priorities of every small business owner. Smart spending practices are particularly important during a business’s first year of operation, as this represents the make-or-break period for many enterprises. While the adage “You need to spend money to make money” often rings true for small businesses, there are limits to how much spending most enterprises should engage in throughout their first year. Budget-conscious entrepreneurs looking for simple and effective ways to reduce spending should take the following pointers to heart.
Invest in Spending Management Software
Every small business needs to carefully track its spending. Failure to do so is among the key reasons so many enterprises overspend and close their doors before the end of their first year. With this in mind, take care to invest in a user-friendly business spend management platform. This will ensure that you’re able to keep a watchful eye over all business spending and receive an accurate accounting of how your resources are being allocated. A dependable spending management platform can be particularly helpful to enterprises that don’t have dedicated accountants and are unable to create workable budgets.
Cut Extraneous Expenses
A plethora of extraneous expenses can be found in virtually any small business. For example, certain enterprises are fixated on owning cutting-edge computer equipment and tech tools that are needlessly expensive. Refusing to commit to a single manufacturer or insist on buying brand new can open you up to a world of savings. More often than not, you’ll be able to find off-brand or refurbished equipment that performs just as efficiently as name-brand products. Overspending on tech can be particularly damaging to a business that’s just getting its start, so if you absolutely insist on purchasing expensive computer equipment, consider waiting until your enterprise has found its financial footing.
Let Employees Work from Home
For many businesses, large office space can represent an extraneous expense. As a growing number of employers are discovering, there’s no need for certain team members to report to the office every day. Since their jobs can be done just as effectively and efficiently from the comfort of home, requiring them to spend eight hours a day onsite serves no real purpose. Ergo, if most of your employees don’t need to be physically present on a daily basis, consider making your business telecommuter-friendly. This will enable you to ditch high-priced office space and rent something more cost-effective. Furthermore, without your entire workforce constantly onsite, you’ll save money on refreshments, utilities and power.
The benefits of telecommuting don’t end there. In addition to saving your enterprise money, allowing employees to work from home can increase productivity and overall worker satisfaction. This level of flexibility can be particularly helpful to team members with children and family obligations. Telecommuting also stands to increase loyalty to your enterprise. For example, if one of your team members receives another job offer, they’re likely to turn it down if it doesn’t include the same degree of flexibility – even if a pay increase is involved.
Negotiate with Vendors
Unbeknownst to many small business owners, a sizable percentage of vendors are open to negotiation. Even if a vendor doesn’t openly advertise small business discounts, there’s a good chance they’ll give you something if you ask. The best time to negotiate with vendors is before committing to do business with them. So before signing a contract, make sure you’re receiving the best deal possible. While it’s possible to receive discounts after a contract has been signed, businesses generally have a lot more leverage before any commitments have been made. Alternatively, if you’re not a fan of haggling, simply seek out vendors that openly offer discounts to small business clients.
It isn’t hard to see why so many small businesses don’t make it past their first year. Poor word of mouth coupled with ineffective spending practices can sink even the most ambitious enterprise in a short span of time. However, while weathering your first year as a small business owner may be challenging, it’s far from impossible. Getting a handle on spending and utilizing limited resources to the fullest can go a long way toward ensuring an enterprise’s long-term solvency.