As a small business owner, you may have quickly come to the realisation that the financial implications don’t quite match the initial expectations. It is reported that small business owners spend more than twice what they originally anticipated during their initial year and much of this is down to not being fully prepared for what payments are required.
A number of business owners make financial missteps during their first year, with many of these being avoidable. Small businesses need to spend wisely, particularly during the initial year or so when financial resources are tight. Starting a business is an expensive venture, with overhead costs, advertising fees and business rent as well as things such as wages and initial stock investments.
There are, however, a number of ways you can reduce costs for your business and keep outgoing costs relatively low. Let’s take a look at 3 easy ways in which you can reduce costs as a small business owner.
One of the first steps in ensuring that you meet your financial goals is to actually know what they are. It might seem obvious, but there are many first-time business owners who find the process of creating a financial plan too overwhelming, or believe it to be unnecessary, meaning that it gets skipped altogether.
Creating a financial plan for your business allows you to take note of where your business is now, where you want it to be and how you plan on getting there. Creating a financial plan also helps you to make better business decisions if you’re against time constraints as well as forcing you to remember the bigger picture if you’re going through a rough patch as a small business owner (as many do with the trials and tribulations of being an entrepreneur).
You need to know how much your business needs in order to survive the next 3, 6 and 9 months as a minimum. This helps to manage expectations, but also keeps things realistic. Spending time creating your financial plan can help you to save money, but it can also ensure business success. Managing your finances isn’t one of the most exciting aspects of being a business owner, but it is essential.
A lot of business owners often aren’t aware that standard business expenses and costs can be tax efficient and save a lot of money, especially for business owners or directors. Things such as business life insurance, pension schemes and private health insurance are often given as standard and can be costly as your team grows, but if you choose to pay for these as a business expense, you can then save on income and corporate taxes.
To get this benefit, it’s recommended that you speak with a trusted business insurance broker who will know exactly what can be claimed. This helps to avoid making any mistakes with payments or risk getting your taxes wrong, which can cause issues further down the line.
Since the Covid pandemic, more and more people have been able to experience remote working and, it goes without saying, that it is something which has been hugely popular. Many business owners have come to the realisation that having a large office, although nice to have, is no longer a necessity. After all, why do you need to pay for expansive office space when your employees can be just as productive from the comfort of their own home?
As a small business, you might not have a large team yet, so why spend money where it isn’t required? Review your current work setup and, if able to, arrange for members of your team to alternate on different days of the week if they’d like to come into the office.
With the latest technology for online meetings and project management, you could also consider going fully remote, whilst still maintaining your service levels. Cutting your office costs will not only reduce your average monthly spend, but allows you to focus on more important business matters, as well as the experience your team will have as you grow.
