Fluctuating markets and an unstable economy make cost control a challenging area for startup businesses. Avoiding unnecessary expense is one of the keys to reaching breakeven point quickly, regardless of whether that expense is large or small.
Depending on the business type there may be a fine line between saving money and presenting a professional image, but there are lots of ways to keep control of cash, with one of the first decisions usually being where to base the business.
Business premises vs home office
The rental of premises is a major expenditure for any business. According to the Department of Business, Innovation and Skills, around 70% of new businesses in the UK are home-based at startup.
Not only is it an easy way to save money, the commute is generally stress-free, and as long as you can separate work from home life it is the sensible option in terms of money. Co-working spaces and serviced offices are readily available for hire should you need to meet clients. Even the local coffee shop can serve its purpose if the walls of your home office start to close in.
Marketing and PR
Social media has a cost in terms of time, but the return can be huge once your business presence is established. Some businesses use only a Facebook page to sell their products, with LinkedIn providing a reliable marketing outlet for professional services startups. The rise in popularity of video marketing also leads to YouTube as another free option. Social media is a cost-effective way to spread the word about a new business, whether to a local market or on a global scale, a huge benefit being immediate feedback from customers that helps you steer the business in the right direction.
Using cloud-based technology saves both money and time for startup businesses. From online accounting solutions that allow your accountant to troubleshoot problems remotely, to document sharing tools for quick collaboration with colleagues, this type of software provides the flexibility to work from any location for a small monthly fee.
Driving down costs with every supplier and avoiding long-term contracts will save money whilst the business is growing. From the company supplying your energy to the latest stationery order, suppliers will want to retain your business and will probably have factored in some room for manoeuvre when quoting their initial price.
Opt for short-term leases and rental of equipment rather than longer-term contracts that tie up too much capital. Apart from releasing more cash each month, it will be easier to change suppliers should the equipment not be quite right for your business.
Taking on employees
The costs of employment can be a huge drain on a young business, with ‘hidden’ expenses including staff training, employers’ liability insurance, sick pay and pension contributions. By outsourcing to professionals working on a freelance or contractor basis, you not only save money, but also have the freedom to choose another contractor should your working relationship prove less than ideal.
Watching the pennies will definitely save you pounds when it comes to expenses such as office supplies and internet fees. It is easy for the cost of everyday items such as copier paper and ink to mount up without you realising, and you can save a surprising amount simply by being frugal.
Keith Tully; partner at UK firm Real Business Rescue which specialises in insolvency solutions and business finance. He has over 25 years' experience helping UK companies in financial distress.