A simple way to define success? When your small business costs are outnumbered by your revenues.
Technically, you could lay off employees or slash marketing spending to boost your bottom line for the short-term—but that’s not the most sustainable (or pleasant!) way to manage your long-term business finances and growth.
Before you consider any drastic steps, consider these five positive strategies to keep your small business costs low.
Unless you’re running a brick-and-mortar storefront, you may not need to lease an office space. The workforce has changed and modern tools now allow people to work from virtually anywhere.
Since 2005, the number of employees working from home has grown by 103 percent, according to figures from Global Workplace Analytics, and 2.5 percent of the U.S. workforce works from home at least half of the time. Furthermore, some research suggests telecommuters are more productive than on-site office workers.
You’ll save on the overhead of an office, food and drinks, and lost productivity due to absenteeism and commute times. Your team can stay in contact with free software, collaboration tools and the occasional get together at co-working spaces.
If a fully offsite team makes you nervous, consider allowing workers to telecommute half-time. Global Workplace Analytics estimates such a move could save your business $11,000 per employee per year.
Get better deals on everything you purchase by being a savvy shopper. Buying smart means different things, depending on what you’re shopping for:
Buy used if you’re in the market for office furniture or appliances. Craigslist is one option, but there are no guarantees with such purchases. Instead, check local retailers that specialize in reselling office furniture, including companies that sell previously rented furniture.
Buy refurbished if you’re looking for electronics and technology. Discount websites like NewEgg and TigerDirect, big-box stores like Wal-Mart and Best Buy, and computer manufacturers like Dell and Apple all offer certified refurbished electronics. Consider protecting your purchase with an added warranty through a provider like SquareTrade if one isn’t provided for free.
Buy in bulk if you need to outfit your team with software or stock your shelves with supplies. When it comes to subscription services, you’ll likely save money if you purchase an entire year of service instead of buying a month at a time.
Vendors, contractors and even some utility companies are open to negotiating, and you won’t know for certain unless you ask. Maybe you need your attorney’s input for an hour each month, your accountant’s for an afternoon every quarter, or someone to come in and fix electrical issues in the office. If so, you should ask for bundled rates, discounts or the possibility of bartering services.
Employees are long-term investments, but not all jobs require such commitment. Alternative workers could save you money, if you know how and when to leverage their skillsets.
Use interns when you’re willing to put forth some effort into a relationship that could evolve into something long-term. Interns work for experience and college credit, and often for far less money than employees. Unpaid internships are also an option, but there are legal limits to their scope of work so make sure you’re up to date with federal and state regulations.
An added benefit of working with interns? You can use the opportunity as a recruiting tool. An estimated 51.7 percent of interns convert to full-time employees, according to a National Association of Colleges and Employers survey.
Contract with freelancers for small or recurring projects that require a specific skill set. Freelancers are self-employed, so you don’t pay payroll taxes or offer them all the benefits of employment. They’re best utilized where the work is easily defined, such as in a website build-out or a certain number of blog posts per week. You’ll save money, but it’s important to watch out: misclassifying someone as a contractor when they should be an employee could get you in trouble with the IRS.
Hire temporary workers through an agency when you want someone for a set, temporary amount of time, particularly if you’d otherwise be paying employees overtime. Agency “temps” are employees, but their taxes and unemployment insurance are handled by their agency, not by you as the small business owner. You’ll pay for the service, but the agency has interviewed and vetted the workers, so you’re not spending as much time on the hiring process—and the staff can get straight to work when they come onboard.
Always compare business loans and business credit cards carefully to make sure you understand the true cost of your financing. Accepting the first loan or credit card offer that comes your way could cost you considerably in interest and fees.
A good rule of thumb is to use a small business term loan for one-time large investments like inventory orders, equipment purchases, hiring new employees, or refinancing your debt. Business credit cards can be used for smaller purchases and ongoing costs—but beware of high APRs, and always pay off your balance on time to avoid unnecessary interest fees!