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).
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.
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 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.
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.
Category: Business Management