Saving money and cutting costs as a small business can be tricky—if you’re a startup in the early stages especially, money might be tight already.
We’ve compiled a list of money-saving tips—ways for you to trim overhead here, and increase efficiency there, until your business is on its way to better financial health.
In this list, I will cover:
- Nearly-universal tips
- Office and home business-related tips
- For those outside the U.S.
No matter your industry or location, you should be able to apply most of this advice, even if you need to tweak it a bit to suit your needs.
1. Go green
You’ve heard it before and it’s still true: going green saves green. Whether you’re running a home-based business, office, storefront—whatever kind of space your business is using, the more energy-efficient your space is, the lower utility costs you’re going to have.
So go out and buy those LED bulbs already—they can save you three-quarters of your lighting bill per year! For more information on greening your spaces, check out Energy Star, a program run by the U.S. Environmental Protection Agency.
2. Use open source and cloud computing
Every startup will use some kind of software, for things like bookkeeping and accounting, word processing, and presentations.
Sourceforge has an index of open source options. For most things you need to do, you can find an open source and/or cloud version of it. “You do not need to buy that expensive office software and servers when you can switch to a cloud vendor—Google is an example—at a fraction of the cost,” says Ali Asadi of A Profit Maker.
3. Use own-brand or generic brand goods
It’s always tempting to buy the name brand, but it’s rarely worth the money. If you’re looking at buying goods for your business, just go with generic (or as they say in the U.K., own-brand); the box may not be as pretty but the product will be the same.
4. Sponsor community events
There’s a wide range of reasons why a business may need to throw an event, but you likely will need to at some point, and they can certainly be costly.
Joining together with another business as a sponsor to support or put on an event can mean a higher quality event and more press for all involved, simply because you’re able to share resources.
5. Barter with other businesses
Especially with other businesses, bartering might seem old-school but can definitely still be effective. If you need a good or service and have something of value to offer in return, this could be a good route.
Approach these types of agreements with a spirit of generosity. Make sure you know the value of what you have to offer, as well as what you’re asking from the other business to avoid insulting or embarrassing anyone.
6. Cut down on meetings
Cutting down on meetings is one crucial way to save money. Not convinced? The next time you’re in a meeting, do some rough napkin calculations based on the number of people in the room, and the average hourly salary you’re paying them. Sometimes the results can be staggering.
Take a look at both your own and your employee’s calendars—how many hours per week are spent in meetings? Really evaluate the cost and benefits to the company. More than likely, you can cut back on some meeting time and free up time for actually getting work done.
One suggestion is to eliminate a lot of information-sharing meetings. If you need feedback on something, send information ahead of time and ask everyone to review it before you sit down to meet.
7. Hire capable employees with little work experience
Hire curious, capable people who are early in their careers. This might initially seem counter-intuitive, but people with little work experience are looking for entry-level positions and salaries, which saves your company money. Of course, there may be times when a more experienced candidate makes the most business sense, but often a solid employee with little work experience just needs a foot in the door, and you’ll find them competent and eager to do well. We all had to get our start somewhere.
Good training counts for a lot. If you do bring in employees with less workplace experience, set them up for success by training them well and checking in often to help identify and address gaps in their knowledge and experience.
8. Allow employees fewer hours
In a similar vein to the previous tip, this might sound odd at first. But there may be employees at your company who would transition to part-time (or even just four days a week) if given the opportunity.
This can be a touchy subject for an employee to bring up themselves, but if you as a business owner make it known that you’re open to shorter work weeks for those who might want or need them, this can save you from paying those full-time wages without having to lose a good team member (and their work product) completely.
9. Retain your best employees
A high performing employee, especially one who is an asset to your company culture is a valuable asset. Not only that, it’s a valuable relationship.
Costs associated with the hiring process can be shockingly high. If you have a solid team member, do what you can to keep them. Check in regularly and take the time to understand what they’re looking for in terms of career trajectory and opportunities for growth. It’ll save a lot in the long run.
10. Consider outsourcing or contracting some work
For those moments when you have smaller tasks that don’t warrant a new hire but that you just can’t add to your already full plate, Simon Slade of Affilorama suggests outsourcing, which is also called micro-contracting. He suggests sites like Elance and oDesk for those tasks that you just need to delegate.
11. Review your operating expenses
If you buy bagels for the office, is there a different bagel shop that will give your business a bulk or loyal customer discount? Have you ever looked into it? The day to day expenditures on simple things—coffee, maintenance, and supplies, for example, all add up. Taking a chunk of time to go through your existing operating expenses to see where you might be paying more than you need to can save you a lot over the long haul.
Business coach Jennifer Martin suggests comparing vendors and getting quotes at least once a year to make sure everything you’re paying for is a fair market rate, including your merchant card services. Martin notes that the more money you process, the more clout you’ll have to negotiate a more favorable contract.
12. Set a budget, forecast your sales, and review regularly
To really get a handle on opportunities to reduce costs, create an expense budget for your business. Then create a sales forecast.
But, don’t stop there. Set a time each month to compare your actual spending and sales to your forecasts. The key here is that regular financial review is going to help you have better insight into where your cash is going, and opportunities to bring more in.
13. DIY marketing and PR
Learn everything you can about marketing and public relations for your industry, and make sure you’re putting your best foot forward when you promote and talk about your business. Hiring a PR firm can be very costly, and if you’re passionate and knowledgeable, you could be your own spokesperson.
Lori Cheek of Cheek’d (who appeared on SharkTank) offers this advice on DIY public relations: “My number one marketing tip is ‘Don’t just think outside the box; Get rid of the box!’ Be creative. Think guerrilla. And if that doesn’t work, sometimes it just doesn’t hurt to ask. I’ve ended up on the news many times by just calling up the news channels and asking them if they’d be interested in featuring my business. It’s sometimes that simple. I would say the most crucial thing in getting media coverage is a subtle yet persistent approach.” You can read more about Lori’s approach here.
14. Minimize costs associated with inventory and supply chain
Contrary to popular belief, there are costs associated with having both too much and too little inventory on hand. Take a close look at your financials to come up with a plan to reduce your inventory supply chain costs.
15. “When in doubt, go without”
This tip comes from Chris Hoyt, and can really apply to every business.
Should you actually make that purchase? Do you truly need to replace something? Think it through instead of just going for something larger or newer. Use what you have until you are certain you need something else.
16. Join a trade association
Often, trade associations will do industry research that you can then access to make the best financial decisions.
Sometimes they can also facilitate setting up deals for bulk discounts or lower insurance rates. You can learn more from the Federation of International Trade Associations.
17. Stay on top of your accounts payable and financial statements
Asadi notes that when money is tight, late fees on bills can be a big problem. Stay on top of your accounts payable to prevent paying additional charges or interest. “Pay your dues on the due date, and take pains to ensure that your collections are on time and that the outstanding balances are minimized,” he suggests.
On the flip side, monitor your accounts receivable to keep your cash flow in good shape, and avoid challenges like having made plenty of sales….but tons of outstanding invoices. The cash flow problem arises when you’ve made plenty of sales, but you still don’t have cash in the bank because your clients haven’t paid yet. Save yourself time and money and set up some processes to make sure you’re getting paid on time and in full.
18. Ask for a discount
So simple, yet often very effective. Just ask whatever vendor if they have some kind of promotional offer or rate and what it might entail. It won’t always work, but when it does, it’s so easy and worth it.
“I’ve found that 90 percent of the time, asking for a discount and then preparing to walk away if it isn’t granted will actually be the trick to save you money and secure that discount,” says Nima Noori, of Toronto Vaporizer.
19. Invest in new technology
What can you create in-house? What can you do on a tablet that saves time and office supplies?
Dee Dee Meevasin of Dee for Dentist points that for her dentistry practice, adopting new automation technologies has allowed staff to automate previously time-consuming tasks, increased overall efficiency, and cut down on third party costs.
Office and home business-related tips
20. Go paperless, as much as possible
Going paperless is a must in this day and age. Not only can it save you money directly, but this can also be a time (and thus, more money) saver. Meevasin notes “using tablets eliminates the time our people spent on printing, scanning, and filing forms.”
When you do have to have hard copies, look into having regularly used forms printed and on-hand as opposed to photocopying them, as this can be a less expensive route in the long run.
Printer cartridges, cans, bottles, batteries, mobile phones—if you can, recycle it.
Most recycling centers will give you money for some items (such as bottles and cans) and some (such as donating mobiles to domestic violence shelters) will be a tax write-off.
22. Buy used office equipment and furniture
Buy used office equipment and furniture. This one is pretty self-explanatory. Craigslist, yard sales, eBay, etc.—if it doesn’t absolutely need to be new, go for something nice and functional but used.
23. Consider a shorter lease
Matthew Reischer, CEO of Legal Advice, suggests that short duration leases are one way to stay flexible in times of growth while saving money. If you don’t need the bigger office now, but you think you will within a year, look to lease on the shorter term.
If you can get started in a lower-cost area, but really want a storefront in a trendier area, you might start out in the lower-cost area with a shorter lease to give you the option to upgrade when your cash flow supports the move. He notes that his company has been able to use short-duration leases on office space to their advantage as prices in the area decreased over time.
24. Share an office or use a coworking option
Another option for cutting costs on leasing is to go in on a space with another business. Of course, this carries its inherent risks, but this could be a viable option if you’ve got a close business connection, especially if you don’t need a ton of space.
Another way to approach this is to look for coworking spaces in your area, especially if your team isn’t too big.
25. Remember your tax write-offs, especially if you’re a home business
Don’t wait until March to start doing your tax planning. Talk to a tax professional if you’re new to paying business taxes. Your obligations, including tax rates and reporting dates, will be different depending on whether you’re a sole proprietor running a home-based business or a corporation.
The key is to plan ahead so you can both avoid paying late fees, and take advantage of as many write-offs as possible.
Outside the U.S.
There is so much business advice that is oriented toward those that live in the United States, and while many of you reading are in fact, hailing from the U.S., we know that lots of our readers come from various countries around the world.
And no matter where you’re from, for a lot of you, business will require travel. So I’m including some money-saving tips that are more particular to a few different countries, but most of the tips in this article are good for wherever you might be.
The South African Savings Institute is a good resource for South Africans, with news, business savings tips, and information on participating in the national Savings Month.
27. Use Skype or another web-based calling service
Using Skype or other web-based conference calling solutions can save your business money, if you’ve been relying on traditional long-distance calling. Some services allow you to screen share easily, or even share a recording of a call later.
In the U.K.
28. When in London, get an Oyster Card
An Oyster Card is “a plastic smartcard which can hold pay as you go credit, Travelcards and Bus and Tram season tickets. You can use an Oyster card to travel on bus, Tube, tram, DLR, London Overground and most National Rail services in London,” according to their website. You can lend it to coworkers or clients as well.
29. Train travel
If you live in the UK and take the train frequently, you can purchase tickets in bulk at a discount. Also, if the train is late, most companies will give you at least a partial refund.
30. Use price comparison websites
The Telegraph reports that price comparison sites such as My Super Market and Cheapflights will sift through prices on items to help you identify the cheapest options for business travel and other expenses.