Cost Saving Tips for Small Business
The toughest part for any small business, especially when first beginning, is cash flow. You, like most other small business owners, have probably poured everything you have into getting this thing off the ground. The first several months could be the toughest as you work to build awareness, and create a solid customer base. So where will you get the money to cover the day-to-day business operations until the good times start to roll in? Keep these cost cutting tips in mind to stretch every dollar you put into building your business.
One of the biggest pitfalls of small business is that they overreact and panic when they get that one big contract or have that one busy Saturday that broke all sales records.
Sudden success, even if it’s temporary, can be exciting and overwhelming. Many small business owners could make a mistake by rushing out to hire a bunch of people who only be twiddling their thumbs and costing you money if things slow down again.
Don’t expect to be able to put out the ‘help wanted’ sign just because you had a couple of good days. Once you have these employees you’re going to have to be able to sustain them over the long-term, because they have bills to pay, too.
Until you fully get this business off the ground, you might consider asking a friend or a family member to help you out on the occasional busy day, and continue to run the business yourself the rest of the time. They’re often happy to help and grateful for the extra cash they make but aren’t expecting full-time employment. You can even look into freelance employees to help with marketing efforts or to manage the website. They can often be hired for project-related work, or even by the hour. Understand that when and how to hire your first full-time employee is a major business decision and you have to weigh the pros and cons.
Watch the inventory
If you’re a retailer you’re obviously going to need stock. When you’re starting off, you want to keep the amount of inventory to a minimum. Sure, keep the front of the store well-stocked but don’t pile up the back room with inventory that you could end up sitting on for months.
Order enough inventory to keep you well-stocked but make your projections wisely; it’s not simply a matter of how much you can stuff into your facility. It is best to have more frequent inventory deliveries instead of tying up valuable working capital on an inventory you’re not immediately going to use. You also might have to make some hard decisions about what you order and set priorities based on actual or projected customer demand.
Get to know all of the supplier options
Often a business starts out, googles a couple of suppliers and immediately settles into doing business only with them. That supplier you’re dealing with may not really be the best option, or the cheapest for you.
You need to be shrewd and strive to be the “man who knew a man.”
A lot of the time that supplier you’re working with is only a middleman who buys from somebody else and marks it up 50%. What this means is that there’s almost always another guy above the supplier you’re buying from.
The idea is to find out who that guy is and try to take advantage of those discounts for yourself. It takes some time, and crafty networking, but your balance sheet will thank you.
Use rental equipment
Buying equipment is expensive and could saddle you with monthly payments. So before you buy, you need to be absolutely sure that the machinery is going to be used enough that it will pay for itself. This is similar to hiring a new employee; the equipment could be underutilized once that big job or contract ends.
If you’re a landscaping startup and have a job that requires a Bobcat, don’t rush out and buy one just for this job. You may not see another project that needs one for the rest of the year and you’re just putting your business into debt right off the bat.
Every city has at least one contractor equipment rental store and that’s your best option, at least for the first year. And beware of committing to a long term rental, you may be better off renting equipment as needed based on your current project.
You can make it beyond the startup phase with solid planning, forecasting, and creativity in how you operate that business. To save money, you will have to think outside the box , and explore all of the options regarding how you spend your money.
There’s an old expression; “there’s a hundred ways to skin a cat.”
To be cost effective and become a successful business person, you’re going to have to learn every one.