Running a business successfully requires a delicate balance between income and outflow. It’s hard work, and no one wants to see all their profits eaten up in expenses. Cash flow is also an issue for many businesses, and saving a little money right now may mean the difference between keeping your doors open and closing them forever.
The average salary for a small-business owner is about $66,148 per year. However, many owners don’t take any pay at all in order to keep things running. You deserve a paycheck for your hard work, though, so finding a few ways of saving money may mean the difference between paying yourself and working for free. Here are six ways to save your business money and see an impact as quickly as possible.
1. Pay Employees and Taxes on Time
When money is tight, it is sometimes difficult to juggle payroll. However, not paying your employees when they’re expecting it can cause a high churn rate. Each time you lose an employee, it costs your business money. You must spend time and resources finding a replacement and training that person. Classify them correctly and know the rules about contract workers versus employees.
Make sure you’re also paying quarterly taxes on time, as penalties add up and can take a real chunk out of your revenue. You should pay taxes quarterly, both to the state and to the federal government. If you sell physical products and collect sales tax, you’ll also need to send that money in each quarter. Pay attention to withholding taxes and pay them on time as well. The late fees add up and can sink a business if you don’t pay careful attention to when money is due.
2. Use Strategic Marketing Tactics
Marketing is one of those areas where a company can use a lot of cash without seeing much return. You must go into it with a plan and make sure you track results so you can repeat what works and get rid of the things that don’t. The first step in any marketing plan is getting to know your target audience. Once you understand them, it’s easier to figure out where to spend advertising dollars and exactly what your message should be.
In a survey of 529 business owners, researchers found 56 percent of small companies planned to spend more on social media in the coming year than on traditional marketing channels due to the ability to target recipients. Use split testing online to see what users respond best to and try out different tactics. Visit trade shows and talk to other vendors about what they do to reach customers. Pay attention to what your competitors try. Use lower-cost alternatives such as social media ads to save even more.
3. Negotiate With Your Vendors
You may be able to reduce costs simply by asking. Call every vendor you work with, from your internet service provider to the place you order shopping bags from, and ask them if they can offer you a discount to keep your business. If you’ve bought from them for a while, they may be more willing to work with you, but it never hurts to ask either way. Even if you only save 10%, that is $10 on each $100 invoice, which can really add up over a year and across multiple vendors.
4. Check Shipping Costs
If you mail out orders as part of your business model, then you may be able to save some money on shipping. Check prices frequently and call couriers to see if they are willing to offer you a better rate. Take it a step further, though, and also look at the cost of shipping materials and if you can save without sacrificing quality. Does your package need two miles of bubble wrap to ship safely, or can you get by with less and a smaller box?
Today’s customers often expect items to arrive within a couple of days of ordering thanks to Amazon Prime. This drives up the cost of shipping. However, you can offer customers an option for slower delivery in exchange for a discount. You can also offer expedited shipping, but make sure you’re charging enough for this option to cover your added expenses.
5. Don’t Delegate Everything
Passing some tasks off to other people so you can focus on growing your company is good advice. However, a small business’s budget may be too tight to pay everyone to do everything. Think about the tasks that eat up most of your time or are beyond your knowledge. These are the things you should hire someone to complete, such as designing a website. However, there are other things you can likely do yourself and save money, such as adding web content or changing the information in your shopping cart.
Make a list of what you are capable of doing and jot down how much time they take. Can any of the tasks be delegated to current employees? Which ones need a professional and require outside help?
6. Cut Insurance Costs
You understand insurance is a vital part of doing business. If you run a brick-and-mortar establishment, you must protect yourself from a lawsuit as well as save your inventory and equipment in case of a disaster. However, there is a wide range of coverages and insurance companies. If you have little time, you may want to go with a broker as a middleman to compare policies and costs and come up with an option that works for you. If you have enough time to do this yourself, you’ll cut your rates even further. Just pay attention to the fine print, such as the dollar amount of coverage and when the policy will and won’t pay.
Once you have a few quotes in hand, find the one that meets your needs with the lowest price. Insurance tends to creep upward over time, so you may need to shop around every year or two to keep rates low.
Building a Profitable Business
The best way to grow your income is by increasing revenue and saving money at the same time. There are dozens of methods to reduce costs, such as using recycled materials and turning lights off when you leave for the day. The six steps above will get you started and instill a passion for saving once you see how small changes add up. Keep working toward lowering spending any way possible, and you’ll save more money than you might have imagined.
Lexie is a UX content strategist and web designer. She enjoys copious amounts of coffee (with a dash of milk) and walking her goldendoodle. Check out her design blog, Design Roast, and follow her on Twitter @lexieludesigner.