Financial problem is one of the most common issues a business encounters during the first year. That is also a fatal mistake that startups fail to avoid. Often, new entrepreneurs lack understanding about business financing, causing them to underestimate startup costs and ruin their business before it even opens.
Plenty of small businesses also incur high operating expenses, from paper usage to fuel consumption. As a first-time entrepreneur, you may not immediately notice that your daily operations are running your business dry.
Of course, running a business costs money; it’s what allows you to offer high-quality products or services, after all. Settling for cheap resources would reflect on your offers. But still, expensive doesn’t always mean better.
That said, let’s figure out how to plan and manage your startup’s costs.
Use Your Business Plan
If you’re having trouble estimating realistic costs for your startup, refer to your business plan. Doing so will help you weigh costs and forecast your income, letting you know how much you’ll need to meet your goals.
Once you commence operations, you may encounter problems with your cash flow, which is another common issue during the first year of business. That usually stems from inexperience in managing and delayed payments from customers. To avoid this, you can hedge your business through financing.
Have Enough Capital
Even if business financing is available, you may not qualify for it if your business has too little financing in the first place. Hence, be realistic from the get-go, and start planning your business only when you already have enough finances to last until the startup is operating.
Control Operating Expenses
Your business will start accumulating costs the moment it launches. The simplest acts, like using your office phone, printing documents, and buying equipment, rack up your operating expenses. However, even if those acts are necessary, you can still modify them to reduce your costs.
Instead of using a traditional landline, convert to VoIP, a virtual phone line that you can contact anytime and anywhere, as long as there’s an internet connection. That allows you to communicate with your remote employees without the long-distance costs of traditional phone lines.
Ditch printing and stick to digital copies. Going paperless eliminates the need for costly ink, paper, postage, and mailing supplies. Also, it’s beneficial for the environment.
Create and stick to your business budget, which can be a powerful tool for minimizing your expenses. And if you use a business credit card, reduce your debts from it; it may not be a quick way to cut down costs, but still a smart one, nonetheless.
Use Secondhand Equipment
Your startup can undoubtedly do with used equipment for the first year. Used cars, as long as maintained well and free of major issues, are more cost-efficient than brand-new ones. Some suppliers of secondhand vehicles and other equipment allow trial runs, so take advantage of those.
Buying used equipment allows you to buy more, which could mean higher productivity. But before making the purchase, thoroughly check the auto or other equipment first, preferably with the help of a professional. Heavy wear and tear damage can be costly to fix; hence, they’re crucial to check.
Look into Bartering
If you think barter trade is a thing of the past, you’ll be surprised that businesses and even individuals still practice it in the present. Find suppliers that are open to bartering to dodge the initial spending for the business’s immediate needs.
Adopt a business-cost-friendly mindset every day to help yourself spot procedures that can be altered. Eventually, saving money will become second-nature to you, but applying these practices to your startup now will speed up that progress.
