Small business owners know that it’s a fine line between success and failure. By the SBA’s estimates, only half of all small businesses survive longer than five years, which means they need to save money everywhere they can.
Of course, there are only so many ways that small businesses can avoid expenses. Whether a business is a sole proprietorship or employs dozens or even hundreds of workers, costs add up. From marketing and advertising to HR and health insurance, businesses need to spend money to make money.
That being said, there are a number of areas where small businesses can cut costs and save money without sacrificing the quality of their work or their output. Especially in the modern era, a number of tools and tricks have emerged that can help savvy business owners reduce overhead and increase efficiency across the board.
Let’s examine seven surefire ways that businesses can save their money.
Create and encourage a flexible workforce
Don’t tie yourself down to a traditional workforce with an expensive office. Instead, cultivate a flexible workforce, encouraging people to work from home. Often times employers find a balance by renting the bare minimum amount of space, or coworking from a shared space.
A flexible workforce also allows you to hire workers from across the country and globe, widening your talent pool to people who don’t require large salaries to live and work in more expensive cities. It’s easier and less expensive than ever to communicate with a national or international workforce.
Buy used, or rent, expensive fixed assets
Fixed assets like heavy machinery, office equipment, computers or storage equipment are used to generate income, but can also be a burden on the bottom line. To save on costs business owners don’t have to set their sights on only new equipment. Buy used, or even find companies that rent out their assets. You’ll be able to focus on your product or service rather than the logistics of paying for something you may end up replacing in a year as you scale.
Find smart ways to invest in your business
It’s true that you need to spend money on your business in order to be effective. But how exactly are you spending that money, and where is it coming from?
When most people start up their businesses, they use their personal savings, or get friends or family to invest. They may also take out expensive loans with high interest rates that they pay down over years. Often, they overlook opportunities for them to get free or low-cost financing that will help them jump-start their business.
For example, lots of business credit cards come with an introductory APR of 0%. While that intro period lasts, you are essentially gifted an interest-free loan that you can use on virtually any business expense. Another common tactic is to invest your retirement funds into your business, which you can do without paying early withdrawal fees. These options are much more cost-effective than loans or equity investments that limit your profits. Speak to your financial advisor first to make sure you’re investing into your business in the smartest ways possible.
Pay off your invoices early
One of the biggest issues that B2B companies face is clients that don’t pay their invoices on time. Offer to pay your suppliers early in exchange for discounts that you can then use to get better deals on their products. Many suppliers will happily give you a meaningful percentage off if you can get them their money early.
Pool resources with peers
Part of what makes it so difficult for small businesses to compete with their larger competitors is that big businesses can afford to cut deals with suppliers and shippers that small businesses can’t. By pooling resources and forming collectives, small businesses can create a tide that raises all the little boats and help each other survive.
Small business owners should look to join buying groups, trade associations, cooperatives, and partner networks to take advantage of discounts, resources, mentorships and other deals that deliver savings.
Modernize your marketing tactics
Good marketing will never be free, but it’s getting easier than ever to be creative with your tactics and spend less money. Small businesses should rely heavily on campaigns that show high return on investment, particularly email newsletters (which has one the highest ROIs in all of marketing), and social media.
Depending on the industry you’re in, you may also find word-of-mouth and networking to be effective in generating new business. Invest your money in attending trade shows, conferences and workshops so you can meet potential new customers rather than relying on a PR firm.
Invest in automated software processes
Many businesses think that they’re saving money by not investing in software that tracks inventory, calculates payroll or posts to social media—instead choosing to do everything manually. But in this day and age, manual processes that result in errors end up costing businesses more in the long run.
Make strategic investments in automated software and platforms that take care of busy work and keep you compliant. Often times an automated email tool for example will respect privacy compliance laws for you, so you don’t have to become a lawyer and marketer, while trying to run your business. Avoiding any legal trouble is always a big money saver!
Cut costs not corners
You can’t cut every cost—otherwise, are you really in business? That said, you can be smart about how you spend your money. Cutting costs doesn’t mean cutting corners or quality, quite the opposite. Save money by being smart. Start with these ideas as ways to get your spending and expenses under control.
Christine Soeun Choi is an SEO associate at Fit Small Business specializing in digital marketing. Currently based in NYC, she has a background in business studies and math with a passion for business development. When not helping small business owners, Christine enjoys taking photos, exploring artwork, and traveling.