Keeping a small business afloat throughout its first year can be an arduous undertaking. As any seasoned entrepreneur can attest, building a steady client base and carving out a name for your company takes time. That being the case, it’s hardly surprising that so many fledgling enterprises operate in the red for a good long while.
During this period, minimizing unnecessary spending is particularly important, and any small business that wishes to remain solvent should seek out ways to get the most for their money. If more efficient spending practices are what you’re after, put the following pointers to good use.
Invest in Spending Management Software
During a small business’s first year, it’s imperative that a watchful eye be kept on all spending. However, if your business lacks a dedicated accountant, this may prove to be easier said than done. This is where cutting-edge spending management software enters the equation. The right software will provide you with a full accounting of all business-related purchases, as well as a comprehensive BSM benchmark report. Forming a solid understanding of where your business’s money goes will ultimately enable you to make informed spending decisions and allocate resources accordingly.
Time Large Purchases
Instead of making a copious number of large purchases all at once, it may be a good idea to space out sizable investments. Of course, this isn’t to say that you should hold off on buying things your company absolutely needs, but if a large purchase isn’t absolutely essential, waiting until resources are more plentiful may help your financial bottom line.
Throughout the first year of operation, many small businesses consistently exhaust their finances and wind up going into massive debt as a result. Spacing out large purchases isn’t exactly an end-all solution to this problem, but it should prove helpful at making the most of limited capital.
Negotiate with Vendors
Unbeknownst to many small business owners, vendors are often open to negotiation. However, since many of them don’t openly advertise this fact, clients generally don’t even think to ask. So even if the vendors your business relies on don’t tout small business discounts, there’s absolutely no harm in inquiring.
Sure, there’s a chance you’ll be disappointed, but you’d be surprised by how much money asking a few simple questions stands to save you. If the vendors you work with don’t offer discounts to small business clients, seeking out vendors that do may prove a worthwhile use of your time. For best results, engage in vendor negotiations before signing any contracts.
It’s easy to see why so many fledgling enterprises make ample use of freelancers. In addition to being cost-effective, freelancers generally require less supervision and commitment than fulltime team members. Unsurprisingly, the budget for fulltime hires is fairly thin for many small businesses during their first year, thereby facilitating the need to bring in freelancers. Furthermore, not every role necessarily requires the creation of a fulltime position. For example, if you only need certain tasks performed sparingly, bringing people on for them fulltime is liable to prove financially wasteful.
If you’d like to turn certain freelancers into fulltime team members but lack the necessary budget, consider extending fulltime opportunities to them once your enterprise has found its financial footing. Not only will this provide your freelancers with incentive to go above and beyond the call of duty, it will clearly illustrate how much you appreciate their efforts.
In this regard, working with freelancers can also be viewed as an extended job interview. If you’re happy with someone’s performance, you can extend a fulltime opportunity to them down the line, and if you’re displeased with their work, you can simply stop reaching out to them. Traditional interviews have their perks, but nothing beats seeing how a candidate performs on the job.
It can take a fair amount for a fledgling small business to establish itself and foster a unique identity. While expecting an enterprise to take off overnight is unrealistic, it can’t be denied that most small businesses struggle throughout their first year. As such, efficient spending should be prioritized throughout this period. When working to ensure that the lights stay on and that cash reserves remain robust, the measures discussed above are sure to come in handy.
Interesting related article: “What is Expenditure?“