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Whether your business is traditional or Internet-based, every
entrepreneur should understand that a business exists to earn
profits. To earn profits, a business can do either or both of
these two things: increase revenue, or cut down costs. Of these
two, cutting on costs is definitely much easier than increasing
income (just ask those failed dot-coms, many of which closed
down without even seeing any profit).
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The need to moderate costs is particularly apparent if you
are a start-up small business with little capital investment.
With hardly any income to speak of, your goal will be to stretch
your dollars as far as possible until your efforts bear fruit.
The general rule of every start up should be to scrimp on
anything unnecessary. Given the limited finances, you need to
allocate these resources to expenses that will increase your
business income. Businesses fail when they overextend themselves
too much: they lease too much space, buy unnecessary
top-of-the-line equipment, hire too many staff, spend too much
on expensive advertising, or spread too fast before they are
ready.
To run any business successfully, whether a brick-and-mortar
or an Internet business, you need to control the money flowing
out of the door. Spend your money only on items that you need
most, and never spend one cent on unnecessary items. Cold hard
cash can buy you time to build your business until it becomes
profitable.
Here are some suggestions to help you save and boost your
bottom line:
Spend only when absolutely necessary.
If you are starting
a business, consider carefully whether you really need $50,000
worth of high-tech equipment, leased office space, fancy artwork
and furniture, and a $100,000 monthly payroll. You should also
forego that television ad until you have really "made
it" for more non-traditional ways of getting your name out
there. It is nice to look grand and big, but pay attention to
the state of your finances. Particularly if you are relying on
outside investments, be aware that money may not come in as fast
as you hope and you could end up with very little leeway to
forestall on your payments. Of course, this does not mean that
you should be a cheapskate, who will forego calling an important
client to save on telephone bills. Spend money, but know when to
scrimp and when to splurge.
Negotiate everything.
Always try to get the best price for
the products and services that you require. By merely asking,
you can oftentimes purchase at a discount. To sweeten the deal,
you can propose to pay early in exchange for a discount
particularly if you are paying in cash or if you intend to pay
within 5-10 days. In addition to saving money, this arrangement
will also allow you to build a strong credit record that your
business can surely benefit from. Remember though; always strive
for a win-win situation when negotiating with your business
partners, suppliers, customers and vendors.
Buy used or reconditioned.
You do not necessarily need to
have the latest equipment to start your business. You can
function just as well, with tremendous savings to boot, by
purchasing used equipment, furniture, tools and other business
related items. Buying used items for your office can help keep
your start-up costs in check. Some entrepreneurs fall into the
trap of buying equipment with superfluous features or expensive
color-coordinated furniture when a simple desk and chair will do
just fine. For example, if you are an accountant, do you really
need that fancy digital camera and full-color laser printer?
Before equipping your office and buying furniture, determine
what your real needs are in terms of being able to work
efficiently, what you need to make a professional impression and
to maintain a healthy cash flow. Check used furniture and
equipment in your local want ads, auctions on and off the
Internet, business closeouts, Internet buy/sell listings and
bidding for great savings. A good bargain may just be the ticket
to fulfilling your dreams. Conserve your cash to growing your
business. You can upgrade your equipment and buy fancier
furniture if you already have a steady income and the business
actually posts a profit. Reward yourself with a modular desk
only after you have had a really good year.
One note of caution
though, buying used items do not necessarily come with
guarantees. Hence, you need to do your homework well by knowing
what to look for, the actual cost of these products if brand
new, and if what you are buying are still in tip-top shape.
Try shopping in alternative venues.
You will be surprised
to discover how much you can save when you use other shopping
venues in addition to your dear-old reliable neighborhood
supplier. Try bankruptcy auctions, for example. Auctions can
offer a terrific opportunity to acquire furniture, fixtures and
equipment for a fraction of what they might cost at a secondhand
dealer. Government auctions are another place where you can buy
business items at incredibly low prices. If you are furnishing
your office, you might also try to check out furniture rental
stores like Cort. These shops usually sell furniture that they
have previously rented out at tremendous discounts.
Shopping by
mail order is also frequently economical and convenient,
especially if you are not living in a major metropolitan area.
Sometimes, you can also get good bargains over the Internet.
Just watch out for the shipping and handling costs. Remember to
use a credit card for your mail order and Internet purchases. If
you have a problem with your purchase, you have little recourse
if you pay by check whereas the credit card company can assist
you if you have a problem with the mail order firm or Internet
company.
The virtue of comparison-shopping.
Always compare when you
shop as prices of goods and services can vary widely. Be always
on the lookout for the best price possible. You can use the
Internet to research and compare the costs. You can go online
and check out prices from computers, software, and car loans,
even bank loans. The Internet has also revolutionized shopping,
effectively pushing concepts as name-your-price, auctions and
price bidding. You can also go to shopping portals and sites
that allow you to compare prices.
Once you find your supplier, avoid being locked in a single
vendor. You can sometimes do better if you put your order up for
bid with their competitors. Beware, though: cheaper is not
always better. While trying to save money, you need to consider
intangibles such as service, quality and convenience in your
decision to switch suppliers.
Consider leasing.
Leasing equipment can sometimes protect
your cash better than buying an item outright. It can be a great
way to get equipment that is more difficult to locate
second-hand. Examples of these are expensive equipment that
requires maintenance, such as copying machines. Be sure to
negotiate the lease carefully and determine the best price for
the product.
Prudent Telephone Use.
If you work from home, one way to
save on telephone expenses is to install a residential line. The
charge for a business line is higher than a residential line.
Just be careful in answering the phone with your business name,
particularly with the phone representative on the other line as
they can change your account from residential to business line,
and charge you for more. In addition, if you live by yourself,
you may want to skip the expense of adding a separate line
(unless of course if you are an Internet business where you need
one line to connect to the Internet and another to receive your
calls). Shop around for the best prices for phone service in
your area. Carefully determine if you really need all the bells
and whistles available in certain phone equipment today. Do you
really need voice mail or will an answering machine suffice? Do
you really need those extra functions such as call waiting?
You can also save a lot if you utilize toll-free calling
whenever possible. Make sure that you have the toll-free 800
numbers of your vendors and suppliers. To check the availability
of the toll-free number, you can dial (800) 555-1212 for the
"800" operator, who will have listings for all
carriers. It is not recommended to buy an expensive "800
directory" from one of the long distance carriers. You can
also use the Internet to search 800 numbers. If you know the URL
of the company or business that you would like to call, go to
their Web site and get the toll-free numbers often listed in
their Contact Us page.
Monitor usage of office supplies.
Office suppliers are
often misused and considerable savings are possible by being
diligent. Often unknowingly, we purchase supplies like pens even
though we still have a box-full of half-used pens. Buy only when
it is necessary, or when you think you can get a great deal like
holiday sales.
Use fax or email instead of mail.
The advent
of technological breakthroughs has radically transformed
business communication. More people now accept and rely on fax
and email for their correspondences. Compared to snail mail, you
save on postage, envelope, paper, and mailing time and get
instant delivery.
Try Bartering.
Bartering involves trading
goods and services directly with other businesses for something
those businesses have that your business needs. A practice while
often done informally between two businesses, can save you
money. A Web designer, for example, can create a web page for an
accountant for free in exchange for some free accounting hours.
If you are on the Internet, it can take the form of banner or
link exchanges. You can also opt to participate in organized
barter exchange organizations or barter on the Internet.
Keep a close watch on energy consumption.
Auto-setback
thermostats and automatic light switches can be used to conserve
energy at low cost. Both of these items can pay for themselves
in energy savings. Close your computer when you know you will be
away from work for a period of time, say to do the laundry or
mow the lawn.
Plan shipping or mailings.
You can schedule
your shipping, mailing or delivery to take advantage of bulk
transactions. If you need to deliver products to your customers,
you can arrange to deliver only once or twice a week in order to
save on costs such as van/truck rental, and other delivery
expenses. You should also take advantage of the special rates
given by the post office for bulk mailings. Avoid overnight or
second day delivery, as these are usually much more expensive.
If you must ship overnight, check the various carriers as well
as the post office for the best rates. You can use the Internet
to compare the prices of the major carriers.
About the Author:
Steve Ma. Reyna is a writer
for Power HomeBiz Guides. For a step-by-step guide to starting a
business, order the CD-Rom or Download "Power Home Business
Ideas" from PowerHomeBiz.com at
http://www.powerhomebiz.com/Index/practicalbizideas.htm
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