Starting a business is an exciting opportunity, but it can also be difficult to manage, especially from a financial perspective. Unless you have the benefit of a massive capital injection, you’ll be operating with a small budget, to begin with, and you might have limited revenue for the first few months (or even years) of your operation to compensate for costs. Fortunately, there are some strategies that can help you save money—and start your business as frugally as possible—without compromising the potential effectiveness of your business.
Use a Coworking Space Instead of Leasing an Office
One of the biggest expenses a conventional business faces is the cost of leasing an office. In a busy downtown area, with a sizable space, you could be paying tens of thousands of dollars (or more) every month. If there isn’t an enormous advantage to this, you’ll be wasting that money. If your business can tolerate going fully remote, you should consider a possibility. But if you’re like most entrepreneurs, you’ll want a place where you can meet with your partners and employees face-to-face.
That’s where coworking spaces come in. According to Workfriendly, coworking spaces provide all the benefits of an office, but for a much lower rate. Plus, you’ll get to network with other entrepreneurs, freelancers, and professionals, which could be exactly what your growing startup needs.
Aside from office expenses, your highest costs will likely be full-time employee salaries. Hiring is ridiculously expensive, and too many businesses are over-eager to fill their ranks with new workers. Instead, hire cautiously and selectively; only bring on full-time employees if you truly need them, and make sure you find a good fit before bringing them on. If you have additional needs in the meantime, consider working with independent contractors or freelancers, who will be much less expensive and more flexible for your business in the long run.
Buy Used Equipment
It’s tempting to buy all-new equipment for your business, especially if you want to make an impression on others; carrying the latest model of a smartphone can be a good look for an entrepreneur selling to prospective clients. But a smarter financial move is to buy used equipment. You can save a few hundred dollars (or more) on everything you buy used, from computers to office chairs, and functionally, you probably won’t be able to tell the difference. Just make sure you’re buying from a reputable source, or make sure to get a warranty in writing.
Rely on Open Source Software
Most modern businesses rely on a suite of different software programs to do their work. In the modern era, those software packages come with a monthly price tag—and a high one at that. If you’re paying $100 per user per service and using 10 services for your team, you’ll be chewing through thousands of dollars of monthly expenses just for your basic needs.
Instead, consider making use of open-source software. Open-source software is completely free and community-managed; it has most of the same features and benefits of its paid alternatives but may be missing a few bells and whistles. For most frugal businesses, this is well worth the tradeoff.
Work Out Deals With Other Entrepreneurs (and Vendors)
Instead of buying everything your business needs, consider talking to and working out deals with other entrepreneurs. For example, if your business provides marketing services and you meet an entrepreneur who sells furniture, you might be able to work out a trade: a few months of free marketing in exchange for outfitting your office with the basics. These deals tend to be mutually beneficial and could save you thousands of dollars.
While you’re at it, polish your negotiating skills. You can negotiate just about anything if you’re willing to put in the effort. Try to get better rates for things like utilities and subscription services.
Monitor Your Cash Flow
This strategy won’t help you save money directly, but it should help you identify problem areas in your business’s finances before they escalate beyond your control. Keep a close eye on your business’s cash flow; this will help you track your income and expenses more thoroughly and ensure that you never become cash-flow negative. It will also help you identify the biggest sources of loss, waste, or inefficiency in your enterprise.
Starting a business is never easy, especially if you’re trying to manage the financial component entirely on your own. However, with these strategies, you should be able to save thousands or even tens of thousands of dollars during your business’s most critical development period. With tighter control over your finances and decent early momentum, you should have plenty of runways on which to launch and grow your business successfully.