Entrepreneurs who have a great business idea and have started a company need to keep a keen watch over where they spend their money. This includes variable costs (e.g., sales commission, raw materials, and packaging) and fixed costs (property rental, company car instalments, etc.). Some of these decisions are easy to make while others require you to do your research and make comparisons. For example, the decision to rent or purchase a business property is usually an obvious one for a start-up.
Initially, you need to have the cash flow to keep the company up and running and start making profits before looking at big investments like commercial property.
The early years of a business often require trade-offs between something that would really help you and not being able to take on more fixed costs. Cash flow should not be put at risk as the young business is still in a very vulnerable area of its growth and an unexpected expense could land you in hot water. Here are some startup cost cutting tips to help you to minimize your business expenditure.
Have a Clear Plan
It is not enough to only look ahead at the coming year. A business needs a five-year and ten-year plan, in addition to working on the current budget. While not every business advisor suggests planning ten years into the future, you should always be thinking of your expansion plans so that you are ready when the opportunity presents and can work towards that. It can guide some of your decisions at this point in time. You should not only look at next year’s budget next year but look at trends that are taking place and what this foretells for your industry and in terms of your company’s monthly and quarterly performance.
Be Thorough in Tracking All Expenses
A business is required by legislation to have proof of income and expenditure and to file tax returns. But it is important to be diligent in keeping track of everything from sales to petty cash and stationery purchases. Get a certified bookkeeper to help you set up your books. There is a plethora of software that can help you manage this and may be worth investing in if you are more of an ‘ideas’ person and less comfortable with detailed work. Knowing where you have spent money can help you plan for future expenses.
Use Benchmarking
When setting up your key performance indicators, you need to know what the norms are in your industry. For starters, what are the key metrics that are measured by successful companies in this sector? What is recommended as the ideal target to know that you are performing? If you are below the industry level on financial indicators, you need to drill down to find out why and determine what you can do to reduce those costs.
Look for Areas Where You Can Save on Costs
Many states in the US have deregulated the utility authority and given consumers the choice to go with a Retail Electricity Provider (REP) instead. For instance, a retail energy provider in Connecticut will give those customers the option of plans with different features and pricing structures. You can save a considerable amount by moving to an REP.
If you utilize these essential startup cost cutting tips, you will start to see a robust cash flow and steadily increasing profit.
