One of the biggest concerns for new entrepreneurs is startup costs. Even if you're not renting a retail space for your business, there are still other bills to be paid before you start seeing a profit. While most business owners plan for these expenses, many don't anticipate just how many extra costs they'll encounter along the way. If you're starting a business on a budget, follow these four tips to minimize your expenses and maximize your bottom line.
Have a budget — and stick to it
It seems obvious that the first step to saving money is setting expense limits, but Carissa Reiniger, founder of small business support community Thank You Small Business, said that a surprising number of business owners don't have a formal budget.
"There is so much power in knowing what is going on in your business, for better or for worse," Reiniger told BusinessNewsDaily. "Managing the finances of my business is not something I naturally enjoy, so I've put rules in place to help me stay on track. I advise setting up a standard time every week or month for reviewing and managing your budget."
Angie Segal, an ActionCOACH business coach, recommended that entrepreneurs factor their own salary into the budget as soon as possible.
"When you don't pay yourself, you take money out of the business elsewhere to cover your own expenses," Segal said. "Giving yourself a salary forces you to make everything in your budget work."
When you drew up your business plan, you probably also had a vision of the things you wanted for your business: all the latest equipment, a full-time staff, your own private office. Every entrepreneur hopes that he or she will be able to make these business dreams come true, but the reality is that you'll sometimes have to sacrifice them to keep your company running.
OfficeEvolution founder and CEO Mark Hemmeter said that small business owners can suffer from a lack of flexibility in their grand plans.
"Your ego and vanity can get in the way," he said. "You want that car or that perfect sign, but it just isn't a good fit for the core of the business."
Hemmeter recommended looking into short-term solutions, like shared office spaces and hiring freelance workers, until you can afford to make long-term commitments like private office suites and full-time employees. Similarly, Reiniger cautioned that entrepreneurs should stop trying to present a certain image of their business if they don't have the money for it.
"Don't worry about being fancy," she said. "If you don't actually need an office space, don't get one. If you don't need an intricate website, don't build one."
Go inexpensive, but not cheap
Many small business owners who spend a lot of money up front on services like marketing and Web design end up regretting it in the long run. There are countless cost-effective tools available for small business owners who want to save money by taking care of their own branding and website development. However, "free" isn't always the right answer.
"Free tools can be a bad idea — they're free for a reason," said Raad Mobrem, CEO and co-founder of Lettuce Apps. "Always pay for the important things, like software. You can ask for discounts with B2B services. People understand that you're a small business just starting out, and if they offer discounts, you'll want to work with them in the future."
Likewise, purchasing the lowest-priced items can also mean getting the lowest quality. Replacing things that don't work the way you need them to can end up costing you more in the long run, so it's important to find the best products and services for your business that you can reasonably afford.
"It's a huge mistake to go as cheap as you can," Hemmeter said. "It doesn't look very professional."
Evaluate and re-evaluate
If you've followed all of these steps to save money in the early stages of your startup, the best way to continue saving as your business grows is to continually revisit and revise your budget. Seek financial advice from accountants and fellow small business owners, and then go over your expenses and try to cut back where you can.
"Find an accountant that acts as a business adviser," Segal suggested. "Look at your profit and loss with him or her every month, and see if anything is creeping up. Be very conscious of your numbers."
As you adjust your budget each month to save money, you'll be able to start investing in bigger, better things for your business. Mobrem's advice is to plan your budget in terms of stages.
"Analyze and think about your long-term goals with your budget," he said. "Ask yourself, 'If I hit this goal, where should my budget go next?'"
Originally published on BusinessNewsDaily.