The majority of new businesses perish in the first few years of their existence, mostly because of poor planning and resource management. While you might not be able to control microeconomic and macroeconomic factors, you can always introduce practices that will improve how you use your money.
“One of the most common ways businesses save money is by outsourcing services,” according to IT Management Solution, a reputable Boston IT company. By partnering with external providers, you can avoid the creation of certain departments. Besides outsourcing, you can also cut costs by optimizing your taxes, getting cheaper loans, and improving your hiring process.
Without further ado, here are some financial tricks you can use to give your young business a fighting chance!
1. Plan Finances in Advance
Financial planning is key for short-term sustainability and growth. Most entrepreneurs totally avoid this step, thinking they can easily wing it. Unfortunately, as they’ll soon realize, the unexpected costs will quickly ramp up, completely draining their budget and driving them out of the business.
Your first task is to create a list of all your resources and future expenses. Besides the financial side of things, you should also consider the goodwill (patents, licenses, and other intellectual properties). Intangible resources often make or break a project, as they can significantly boost your future revenues.
2. Avoid Borrowing
The best way to finance a small, up-and-coming business is through bootstrapping. This is especially true if your product or service is dependent on intellectual work, not necessarily physical resources. So, depending on your situation, you should try to avoid traditional loans and angel investors.
Using your own money is fantastic for finances while also eliminating the repayment stress. You don’t have to worry about interest rates and things of that sort, which will allow you to focus on your day-to-day operations. In the first few months, most companies don’t make any sales as it is, so there’s no need to add extra financial burden.
3. Prepare Digital Channels
An indirect method of saving money is by preparing the field for the new company. You can slowly build your non-financial resources, such as social media accounts and websites before you launch the brand. That way, when you finally decide to invest in inventory, salaries, and rent, you’ll have a better chance of closing sales.
Optimizing your website in advance is especially important for search engine optimization. Google gives an advantage to older platforms with lots of content, so by slowly writing articles and posting them before launch, you’ll have more success with your marketing. Similarly, you should find a way to grow followership on social media slowly before launching full-scale promotional campaigns.
4. Create a Professional Network
Creating a big professional network provides numerous advantages. You can use these contacts to negotiate prices and find cheapest networks, co-host events, perform joint marketing activities, distribute goods and services, and so on. Most importantly, you will have a list of partners you can trust in all your future endeavors.
Connecting with other entrepreneurs is especially valuable if you’re a young business owner. Simply chatting with some of these individuals will increase your knowledge and teach you various tricks for managing your resources. Keep in mind that professional connections can also help you land new clients as long as there’s no conflict of interest between you and your contact.
5. Use Free Software
Nowadays, many business processes are done online. Logistics, accounting, marketing, and internal communication are just a few things you can streamline via the Internet. That being said, the efficiency of all these processes is heavily affected by the software that manages them.
As a new business owner, you need these tools to streamline processes and remain competitive. On the flip side, you can’t overspend on them. The best way to handle this situation is by finding cheap and free tools in advance. While this software might not have the same functionality as premium paid software, it will still help you out during the initial phases.
6. Pay Attention to Inventory
Inventory management is a big ticket for any company that deals in wholesale and even retail products. A common mistake is overstocking on specific items and keeping them on the shelf for months without end. The “stuck money” will hamper your cash flow, and some of it might not ever provide any returns.
The best way to manage your expenses is by purchasing smaller quantities of items and gauging customer interest. Check how these products are selling and if there’s any reason to increase your orders. Even if you lack some products, it beats having a huge stock that you can’t move. Among others, overstocking can lead to the expiration of some items and, thus, losses.
7. Use Cheap Payments
Using payment providers with cheap rates is another way to cut your costs. While you might feel inclined to get a payment processor that offers great service and availability, it might be better to go with a smaller brand that comes with lower fees.
On the other hand, when tackling payments via the website, you should try to give users as many options as possible. While this isn’t necessarily a money-saving trick, it’s something that will boost your revenues as more people will be able to purchase items from your internet store.
8. Cultivate Your Leads
Companies spend enormous amounts of money closing leads. Because of that, it’s a common practice for businesses to maximize each one of their clients. The best way of squeezing more from every person is by cross-selling and upselling. Pitching the same person over and over again might seem aggressive, but it often yields fantastic results.
You should also do everything in your power to retain customers. Send them occasional birthday messages as well as newsletters. Try to deepen the connection between you and your clients, so you’re always on their minds.