You probably know that about 50 percent of small businesses will die within a decade. What you might not know is 82 percent of these businesses will die because of financial challenges.
How is your small business doing financially?
Of course, the COVID-19 pandemic has wreaked havoc on millions of businesses. Hundreds of thousands of small enterprises have closed shop as a result.
If you’re still in business, there couldn’t be a better time to learn a couple of money-saving tips. In a harsh economic environment, business survival can come down to your financial savviness.
Keep reading to learn how to cut your costs and save a buck here and there.
1. Don’t Start a Business Without a Business Plan
You might be wondering what a business plan got to do with saving money. Well, everything!
A business plan is a blueprint that guides the operations of your business. More importantly, it helps you determine the amount of money you need to start and run the business, as well as make profit and loss projections.
In other words, a business plan tries to help you avoid getting into financial trouble. As such, don’t start a business with a business plan. And not just any business plan. It has to be an expertly written and detailed business plan.
If you’re already running a business, it’s important to stick to the business plan. Deviating from the plan could cause you to make decisions or moves that turn out to be costly.
2. Keep a Separate Business Account
Did you know 27 percent of small business owners use their personal bank account for business?
If you’re running a sole proprietorship, you might not see the need to set up a separate account for your business. After all, you’re the business and the business is you.
However, it’s not advisable to use one account for both personal and business finances, especially when your goal is to save money. Using the same account makes it difficult to track business finances. Regardless of how meticulous you are, you’ll make mistakes.
When you’re unable to accurately track business finances, it’s hard to know how much profit or loss it’s making. Come tax time, you won’t be in a good position to make use of the deductions that are available to small businesses like yours.
Yes, operating a separate business account might increase your costs, but that increase will be marginal. You’ll have greater control over the business finances, which is key when you’re looking to save money.
3. Eliminate or Reduce Unnecessary Expenses
In the course of running a business, it’s commonplace to start incurring expenses that aren’t key to the operations of the company.
For example, you could start spending money on cable television for the business. Or you’re now purchasing food for your employees. Or you’re spending a lot more on business travel.
Cutting or eliminating unnecessary or secondary expenses is one of the best ways to save the business money. Of course, identifying these expenses is a challenge.
Start by conducting an audit. List down all your expenses and their level of importance to the company. If there’s an expense you can do without, it’s probably a secondary expense.
4. Reduce the Cost of Primary Expenses
Secondary expenses are dispensable. Primary expenses are indispensable.
This, though, doesn’t mean they should hold your business hostage. You might not be able to do away with them, but you can reduce what they’re costing you.
Primary expenses include things like rent, energy bills, wages, and interest on debt. Identify the expenses that you can reduce and find ways to start reducing them.
For example, if you’re renting your commercial space, evaluate whether it’s right for your business. There could be a chance it’s too big for your company. Moving to a smaller space could help reduce your cost of renting.
Another primary expense that can be reduced easily is your energy bills. First, if you aren’t using LED bulbs and energy-efficient appliances, it’s easy to see why your electric bill is giving you sleepless nights.
Second, you could switch to solar power if you haven’t already. Solar power can bring down your energy bill to zero, though the initial investments can be high. Read through this solar definition for the answers you need on how solar power can help your business.
5. Hire a Bookkeeper or Accountant
A mistake a good number of small business owners make is waiting until it’s too late to hire a bookkeeper or accountant. If your business is already on sinking financial ground, there isn’t much a financial specialist can do to help you remain afloat.
One of the first hires you should make is a bookkeeper. This professional will help your business save money in a number of ways.
A bookkeeper will keep track of your business’s expenses. They’ll know where the money is going and can use their expertise to identify unnecessary expenses.
Bookkeepers are proficient with small business taxes. They’ll utilize all the deductions your business qualifies for, ensuring you aren’t paying a penny more than necessary in taxes.
Implement These Money Saving Tips
There are different ways a business can save money. Not all of them will work for your business, however. That being said, implement the money saving tips fleshed out above and you’ll likely see a change in your finances.
Stay tuned to our blog for more small business tips and advice.