According to a study conducted by Small Business Administration in 2018, half of all entrepreneurial ventures fail within the first five years. While there are a number of reasons for this rather alarming fact, shortage of cash is one of the primary ones.
This makes it even more important for small business owners to be ultra conservative about spending and cash management so that they save the maximum possible and can use the savings to make their businesses perform better.
Most Effective Ways for Entrepreneurs to Save Money
Make Use of All the Tax Breaks
It may sound surprising but entrepreneurs habitually tend to lose lots of money by overpaying their taxes. The key to saving money legitimately is to make sure that you use all the tax deductions that that IRA provides on various aspects of your business finances.
It is important to seek the guidance of an experienced tax professional who can give you the correct advice on calculating the minimum amount of the tax payable while still remaining compliant with the tax rules.
While experienced CPAs can be somewhat expensive, you will generally be able to save much more and also ensure that you do not get into trouble with the IRA that can prove to be quite expensive.
Increase Your Productivity
The most common complaint of entrepreneurs is that they have to manage all aspects of their venture and seem to be perpetually short of time. Since time is precious, it is all the more important that you don’t waste a single minute that can otherwise be employed in making your business grow.
You need to be a smart entrepreneur who can use the many productivity tools that can make you more effective.
Automating repetitive tasks using online productivity tools or smartphone apps can save you a lot of time, so do apps that take care of the various aspects of your business, like finance, inventory, logistics, social media analytics, and much more.
You can increase your savings by choosing to use the free versions of the tools and apps that can usually take care of most of the common functions that eat up your time.
Ensure Appropriate Legal Coverage
Most entrepreneurs are completely clueless about the legal aspects of running a business, which can prove to be extremely expensive in case somehow things go wrong and you incur a legal liability arising out of a defective product or a workplace incident.
It is better to have a legal eagle to vet all your documentation including warranties, supplier agreements, and even employment offers.
Covering yourself from being sued can mean the difference between living to do business the next day and becoming exposed to severe liabilities that can even lead to bankruptcy.
Regardless of whether you are into manufacturing or delivering services, it is not necessary to do everything by yourself even though you might be tempted not to let go.
In virtually every sector, the margins are under severe pressure and it can be really a big advantage to find reliable partner suppliers to whom some of the work can be outsourced.
Outsourcing can bring about significant cost savings that you can use to market your brand better. Outsourcing opportunities abound for virtually every aspect of business right from a helpline operation to the manufacture of vital parts if not the full product.
Manage Your Debt More Effectively
Entrepreneurs striking out on their own generally need to use their credit cards and personal loans to get their businesses rolling.
So, when the number of debts becomes too numerous, managing them can be very difficult and the very steep rates of interest on credit card dues can often push the entrepreneur into a debt trap that can be very difficult to get out off and can threaten the survival of the business venture.
However, this doesn’t have to be your case! If you’re seeking additional finance to stay afloat, you need to learn how to calculate your debt coverage service ratio, because it will play a big factor when loan providers decide whether your business funding is approved or not.
Debt consolidation or debt settlement can be very useful options to consider but you need to ensure that you work only with a reputable company to avoid being ripped off.
Debt consolidation can mean very significant savings in the interest payable as there is a significant difference between the typical credit card APRs and the rates charged for debt consolidation loans from private lenders.
Debt settlement, while being a more drastic step can, with some effort, wipe off half of what you owe to the card companies and ease the strain on your cash flows.
Buy from the Right Vendors
If the nature of your manufacturing process involves buying of raw materials or components from suppliers, choosing the right ones may mean a lot of difference to your sustained existence.
While you should certainly chase the lowest possible prices, choosing the vendor with quoting the least prices may not always be a good thing; for one, the quality may not be up to the mark and the supplies may also be erratic leading to disruptions in the manufacturing and customer dissatisfaction.
Aim to strike up a relationship with a supplier who is reliable and gives you decent prices. Relationships are extremely important because whenever there is a hiccup in your cash flow, you can delay the payment by a few days without any serious repercussions.
Ease the Pressure on Office Rentals
When the business is in its early stages and the number of employees is few, it is not necessary for you to spend a bomb on a fancy office, a mistake many entrepreneurs end up making to feed their egos.
See if you can operate your business from home or if that’s not practical for some reason, examine the possibility of operating out of a low-cost executive suite that gives you access to a receptionist to take messages or forward calls and a mailbox to receive business correspondence and bills.
Saving money may seem to be a very big deal when you are stressed out trying to set up a business of your own, however, if you look around and examine all that you need to do, you will discover many opportunities for saving money that you can put to use to make your business grow.