Home » How Small Businesses Can Save Money in Their First Year
Many entrepreneurs and new business owners quickly discover that the financial realities of running a business don’t always meet initial assumptions when looking into their startup expenditures. Small business owners often explicitly state that they spent more than twice as much in their first year as they had anticipated.
Where did their predictions fail? Did they spend too much in some areas? What more could they have done to cut expenses? These and other issues are what we are going to take a closer look at here.
Writing out your financial goals is the first step toward achieving them. Although it may seem simple, many first-time business owners avoid developing a financial plan altogether because they think the process to be either too difficult or unnecessary in the beginning. If you’re inclined to follow suit, resist the urge.
You are forced to evaluate where you are now, where you want to go, and how you want to get there when you make a financial plan. Additionally, it aids with emergency decision-making and compels you to keep the big picture in mind when you’re feeling overwhelmed by the day-to-day of running a business.
The specific amount the business will require to survive for the first six months must be determined. How much do you anticipate your sales to be with that? What do you expect to earn from your sales? What would happen if you missed that? What happens if you surpass that after going viral? Both of these situations call for a backup strategy.
Additionally, even the act of developing a financial plan itself might result in financial savings, as you are more likely to spend money in more sensible ways.
You might be tempted to rush into production once you have a product or service idea, but doing so without first conducting any market research or validating your concept could prove to be a significant financial drain.
Spend the majority of your first year investing in research and development if you’re producing your own goods. After creating a prototype, you must determine that other people will love it just as much as you do.
The same is true of services. You need to determine if there is a market for what you intend to offer, who that market is made up of and how much competition you will be facing.
In order to avoid wasting time, money, and effort on a product that won’t sell, product validation makes sure that you are developing a product that consumers want and will pay for.
You can verify your product or service ideas in a number of ways, such as:
According to a significant recent study, businesses who rushed into branding and selling their products without spending enough time on product research and validation ended up spending twice as much money when they later had to rethink their service or product offerings. Which is something that you certainly won’t want to do.
No business can thrive without marketing. Startup marketing is tricky, though, especially if resources and expertise are limited. And even if resources aren’t limited, pumping money into paid ads doesn’t guarantee you sales.
As the marketing landscape is so vast, thanks in large part to the rise of the Internet, creating a marketing campaign that is as targeted as possible is a must, and via the concept of ‘guerilla marketing’ you may be able to spend a lot less than you think. Here are some basic ideas to keep in mind:
Select the appropriate social media platforms for your brand. Once you’ve decided which platforms to use, check to see that your brand is appearing often and consistently across all of them and make consistent, useful updates.
Create a sales-oriented website design. A customer’s opinion of your website can be formed in just a second. The navigation on your homepage, the performance of your site, and the checkout process all need to be flawless.
Educate: Often searchers find a small business’ website when they are looking for information that will help them make a more informed purchase decision. Provide that information, in the form of blog posts, white papers, resource guides and more. Not only will well-written content help drive consumers further down the sales funnel, but it will also establish your business as a trusted resource, and an ‘expert’ in your field.
Expand your email list: You can utilize your social media accounts to provide a free giveaway in exchange for contact information, or you can link to deals on your website that solicit email signups (for example, a 15% discount for registering). Your website content can be a great way to expand your email list too. Even your “coming soon” page can serve as a pre-launch platform for this.
Encourage loyalty: Making money from repeat clients is less expensive than acquiring new ones. Create a VIP program for your loyal clients, or provide them discounts in exchange for recommendations.
Cross-promote complementary brands together: Through cross-promotion, you can collaborate with similar companies to sell your services in return for them marketing yours at no additional expense to either party.
Decide on important performance indicators (and track them). To determine how well your website is functioning properly, and find out where you are losing customers, you should become familiar with Google Analytics. It’s a free resource, and although it can look daunting at first, the company provides a surprising amount of free help that will allow you to get the most out of what it has to offer.
Canadian tax laws and regulations, even for new small businesses, are complex and can change often, so staying on top of your tax obligations is critical if you want to avoid penalties or hefty fines. More than that, understanding tax laws means you can take advantage of some real cost savings.
There are many ways for small businesses to legally reduce their taxes. Some tips to keep in mind in your first year:
Hold onto your business receipts. The parking fee on the way to meet a client, the coffee you picked up for the office—all these small costs add up over time and can be written off as business expenses if you’ve held onto your receipts.
Find home-based business deductions. If you run your business from home, you may be able to deduct a portion of home-related expenses, such as heat, electricity, and other home maintenance.
Take advantage of grants and allowances: Canada in general, and Ontario specifically, offers more ‘perks’ to small businesses than you are probably aware of. If you are entitles to them, you should take them.
Lots of small businesses see working with an accountant as an expense they cannot afford yet. However, that can be a very false economy.
Working with an accountant will not only ensure that your ‘books’ remain up to date, and help ensure that everyone who needs to be paid is paid on time, but also that you are ready for tax time – and will be filing tax returns that are advantageous to you as possible – and that you really are getting the most out of your budget.
An experienced small business accountant is also a valuable source of knowledge and wisdom, and can assist with everything from finding additional business funding to setting long term financial goals, both for your business and yourself.