Starting a new business often means working with a limited budget. While it would be ideal to have unlimited funds and resources to buy all the equipment needed and hire a full team, the reality is that most startups have to operate with limited resources and revenue. However, there are ways to save money and set your company up for success in the long term.
The Power of Operating Lean
Operating lean means cutting unnecessary expenses and prioritizing your spending to ensure your business runs as efficiently as possible. There are several benefits to operating lean, including:
- Preservation of funds: By cutting expenses, you can make sure that your limited funds go as far as possible.
- Forced efficiency: Operating lean forces your business to be efficient, which leads to faster and better service for your customers.
- Higher profitability: Spending less money while making the same amount of revenue means enjoying higher profitability.
- Better scalability: A business that operates lean and efficiently is much easier to grow than one that’s bloated with unnecessary expenses.
- Tighter prioritization: By saving money, you’ll be forced to consider your business’s priorities with greater scrutiny and focus on the factors that are truly important to your success.
- Greater visibility and transparency: Keeping meticulous track of your spending leads to greater visibility and transparency, which is great for partners and stakeholders.
What are the key methods to cut costs and run a new startup with minimal expenses?
One of the biggest expenses for any business is the cost of office space. However, with the advancements in technology, businesses can now function remotely, which can save them a considerable amount of money. Here are some ways working remotely can help you save money:
- Office leasing: Renting an office space can be a huge expense, especially in a competitive city. By working remotely, you eliminate the need to rent an office space, which can save you tens of thousands of dollars per month.
- Transportation: Commuting to work every day can be a time-consuming and expensive task. When your business is remote, your employees can work from anywhere, eliminating the need for transportation and saving everyone time and money.
- Employee salaries: When your business is remote, you have the ability to hire employees from anywhere in the world. This means you can hire employees from less expensive areas, which can help you save money on salaries.
- Utilities: When you have an office, you have to pay for utilities like electricity, gas, and water. By working remotely, you eliminate these costs entirely.
- Office supplies: Even seemingly minor expenses like office supplies can add up quickly. When you work remotely, you don’t have to worry about things like printer maintenance, paper, or coffee and kitchen supplies.
Take care of your own professional services (When you can)
As a small business owner, you may be tempted to outsource tasks such as professional cleaning, accounting, or legal services. However, if you’re on a tight budget, consider taking on these tasks yourself. For example, instead of hiring a professional cleaner, invest in some basic cleaning supplies and do it yourself.
Of course, this isn’t the case for all professional services. Some require specific expertise and should be outsourced to a professional. But for tasks that you can do yourself, taking on the responsibility can save you a lot of money in the long run. Plus, it’s a great way to stay involved in all aspects of your business, even the nitty-gritty cleaning details.
Practice smart hiring
One of the most significant expenses for any business is the cost of salaries and benefits for employees. By practicing smart hiring, you can keep your startup running lean and avoid overspending on unnecessary expenses. Here are some tactics to consider:
- Keep the team small. While it’s tempting to hire as many people as possible, it’s important to keep your team limited to the people you actually need to take care of business. Extra overhead costs from overstaffing can crush your business, so it’s crucial to evaluate your needs carefully before bringing on new team members.
- Hire people for multiple roles simultaneously. Hiring generalists who can perform multiple roles is more cost-effective than hiring specialists who only have one specific skill set. Consider hiring someone who can help out with HR tasks in addition to their primary role, especially if there’s not enough work to justify hiring a dedicated HR manager full-time.
- Hire based on talent rather than experience. Experience often comes with a higher salary, but it’s not always necessary to hire the most experienced candidate. Target job candidates who have ample talent and the right attitude, even if they don’t have much experience. They’ll be less expensive than their more experienced counterparts, but they’ll be likely to add plenty of value to your organization.
- Rely on freelancers and contractors. Not all partnerships and hires need to have full-time roles. Supplement your team with freelancers and contractors who work only when needed. It’s a great way to save money and allow your team to be flexible simultaneously.
Take advantage of no-cost solutions when you can.
There are plenty of free solutions available that can help you save money and still get the job done. Here are some of the best ones to consider:
- Open-source software: Why pay for expensive software when there are free, open-source alternatives available? Open-source software is often just as functional and secure as paid software, but without the high price tag. Take advantage of free options like LibreOffice for word processing or GIMP for photo editing.
- Social media: Social media can be a powerful tool for marketing your business, and it’s often free to use. Create a business account on popular platforms like Facebook, Twitter, and Instagram to start posting and building your audience. While organic reach may be limited, free marketing exposure is hard to pass up.
- Word of mouth: Don’t underestimate the power of word-of-mouth advertising. Give your customers exceptional experiences, ask for referrals, and network actively to spread the word about your business’s existence and value. It only takes a bit of time to stir momentum in this area, and it could grant you thousands of dollars’ worth of exposure.
Barter and negotiate
One way to save money is by using bartering and negotiating strategies. By bartering, you can collaborate with other startups and local businesses to trade services rather than paying cash for what you require. For instance, you might offer accounting services to another company in exchange for some HR services. Many entrepreneurs are happy to engage in this kind of exchange because it benefits both parties. Negotiating is another technique that can help you reduce the expenses of the products and services your business needs. Sometimes, merely asking for a discount can result in one. With more practice, negotiating will become more comfortable for you.
Gradual Scaling is Key
Ensure that you do not expand your business too rapidly. Many business owners, particularly those who are new to the industry, believe that it is imperative to develop their business as much and as quickly as feasible. While this notion may be alluring, and many of us wish to see our enterprises functioning nationally in the first year, rapid expansion can lead to difficulties. If you recruit too many employees, invest in too many sites, or extend your business excessively thin in pursuit of expansion, you may lose your corporate identity, squander funds, and alienate customers. In essence, your entire enterprise could collapse. Rather, concentrate on making modest, sustainable, and manageable decisions when advancing your business. Take one step at a time.
By implementing these cost-saving strategies, your startup has the potential to save a significant amount of money, ranging from thousands to even hundreds of thousands of dollars in the first few years. This can help establish a lean foundation for your business, allowing you to focus on achieving efficient profitability. With a reduced financial burden and streamlined operations, your startup will be better equipped to achieve long-term success.