Initial startup costs are some of the biggest expenses a new business owner will have to encounter. Before you turn a profit, there are many parts of the business that need to be covered up front, and entrepreneurs don't always anticipate some of these expenses.
To reduce your startup costs and stretch your dollars a little farther, follow these tips.
Have a budget, and stick to it
A simple way to save money as a new business owner is to set spending and expense limits. However, a surprising number of business owners don't have a formal budget, said Carissa Reiniger, founder of small business support community Thank You Small Business.
"There is so much power in knowing what is going on in your business, for better or for worse," Reiniger told Business News Daily. "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."
"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."
Thatcher Spring, CEO of GearLaunch, said entrepreneurs should always do as much as possible with what they have before they add more fixed costs.
"At my company, we only hire when there is too much for the current staff to reasonably accomplish without additional help," he said. "I've also found that hiring less-experienced, smart, adaptable employees, instead of only those that are senior and highly experienced, can help keep salaries under control."
When you created your business plan, you might have envisioned all of the latest office equipment, lavish holiday parties and enough staff to take on big projects. However, not all of those business luxuries are guaranteed.
Office Evolution founder and CEO Mark Hemmeter said 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 using shared office spaces and hiring freelance workers, until you can afford to make long-term commitments such as acquiring private office suites and hiring full-time employees.
Spring added that business owners should always plan for every effort to take longer than expected, whether it's launching a new website, signing up customers, sourcing new products or hiring employees.
"Make sure you always set aggressive goals, but realize that there will be unexpected terrain on the pathway to success," he said.
Go inexpensive, but not cheap
Startup costs for a new business add up, but there are tips and tools for finding the best areas to spend the money and those where you can cut back a bit. Spring noted that there are numerous cost-effective, self-service tools available to small business owners who want to save money by taking care of their own branding and website development.
However, it's wise to be wary of "free" opportunities, warned Raad Mobrem, CEO and co-founder of Lettuce Apps (acquired by Intuit).
"Free tools can be a bad idea — they're free for a reason," Mobrem said. "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."
That said, spending money on the lowest-priced items can mean getting the lowest quality. As a result, you may have to replace things multiple times, and that can be more expensive than going with a pricier option in the first place.
"It's a huge mistake to go as cheap as you can," Hemmeter said. "It doesn't look very professional."
One area where you may want to splurge is your company culture, Spring said. You can invest in small items, such as snacks and comfortable work furniture, which don't necessarily cost a lot but produce meaningful intangible value. "Having a great office environment will improve productivity," Spring said.
Evaluate and re-evaluate
After you follow the initial tips to save money and reduce the startup costs of your new business, it's just as important to make sure your expenses stay on track as your business grows. 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?'"
Additional reporting by Nicole Taylor. Some source interviews were conducted for a previous version of this article.