By Ryan Kh
As an entrepreneur, you know that launching a small business from square one is a daunting, years-long task.
“The entrepreneur who creates a mobile app that is wildly popular overnight [is] a miracle story, not a success story,” writes Startups.co founder and CEO Wil Schroter. “Don’t ever use that as a guide.”
The typical startup takes about three years to break even, and several years beyond that to find real traction in the market. In the meantime, founders must be laser-focused on controlling and trimming costs wherever possible.
Whether you’re biding your time to break-even or carrying your frugal beginnings forward even after reaching the profitable promised land, you can take these six cost-cutting steps this week.
1. Move Into a Coworking Space
Coworking isn’t just for creative freelancers and solo practitioner professionals anymore. It’s a viable option for small and even midsize businesses and teams seeking flexible, cost-effective office space at a fraction of the cost and complexity of the typical long-term office lease. Yes, there are tradeoffs, but the monthly savings and lack of long-term commitment more than make up for them.
2. Apply for a Small Business Rewards Credit Card
The best business credit cards are win-wins: They build credit — an essential consideration for small businesses that may need larger loans down the line — and pay users back for every eligible purchase. Just make sure you use your card responsibly: paying off the full balance each month, keeping your credit utilization ratio under 40 to 50 percent, and avoiding frivolous or spontaneous purchases with no clear business purpose.
3. Turn Off the Lights, Turn Down the Thermostat
If you own your company’s workspace or bear responsibility for utility bills in your leased office, give your green thumb some exercise and implement commonsense energy-saving measures:
- Turn down the heat and AC to comfortable, mutually agreed-upon temperatures
- Install a programmable or smart thermostat to further reduce climate control costs
- Use passive heating and cooling techniques, such as automatic blinds
- Turn off lights when not in use or install motion-sensing light switches
- Power down office equipment when not in use
- Install low-flow water fixtures in your office kitchen and bathrooms
4. Negotiate With Suppliers and Vendors
Remember the golden rule of negotiating supply contracts: You don’t know until you ask.
Use whatever leverage you can muster to reduce your professional service, equipment, raw material, and office supply expenses. Smaller vendors are more likely to cave under pressure, but larger suppliers could be game too, especially those operating in competitive industries. Plenty of office supply firms offer generous bulk discounts, for instance.
5. Use Freelancers and Temps Where Possible
W-2 employees are dependable, sure. But they’re also really expensive. You’re responsible for the employer share of your W-2 employees’ Social Security and Medicare taxes, complying with all applicable wage and overtime laws in your jurisdiction, and (in virtually any white-collar field) covering part or all of the cost of their insurance, retirement plan contributions, and fringe benefits.
6. Pay Invoices Ahead of Schedule
Lastly, avoid late fees and penalty interest by paying supplier invoices in full, ahead of schedule. Past-due invoices usually accrue interest and charges — 2% per month plus a flat late fee is typical.
7. Always Be Trimming
If you have a sales team, you surely tell them (or will them) to “always be selling.” As a small business owner, it’s just as important to your company’s prosperity that your entire team “always be trimming.” Never stop looking for opportunities to reduce your overhead and discretionary expenses.
Ryan Kh is an experienced blogger, digital content & social marketer. Founder of Catalyst For Business and contributor to search giants like Yahoo Finance, MSN. He is passionate about covering topics like big data, business intelligence, startups & entrepreneurship. Follow him on twitter: @ryankhgb.