Opening a small business takes a tremendous amount of self-motivation and entrepreneurial expertise. Since the majority of small businesses shut their doors within the first year, calling business ownership a risk would be a huge understatement. There are many reasons for which small businesses go under, but at the end of the day, nearly all of these reasons pertain to insufficient financial resources. Not every first-time business owner is a seasoned money manager, and suddenly finding oneself in charge of overseeing the resources of an entire enterprise can be equal parts stressful and challenging. Fledgling small business owners on the hunt for effective money management tips can benefit from the following pointers.
Utilize Cost Reduction Solutions
Business owners who lack experience in financial management should consider utilizing cost reduction solutions. In addition to money management software designed specifically for entrepreneurs, you’d do well to consult with experienced financial planners and managers when plotting out long-term goals and working towards long-term solvency.
Don’t Rent Needlessly Large Office Space
When scoping out potential bases of operation, a lot of first-time business owners want to go big. After all, size is often conflated with success, and some people believe that a large workspace is an integral part of business ownership. However, regardless of where your enterprise is based, larger office spaces are synonymous with higher rental rates. Depending on the size of your workforce, you may have no choice but to seek out a spacious place of business. Conversely, if you have a fairly small staff, you may be able to get by with a modest office space.
Business owners who fall into the latter category should carefully consider how much space they actually need when exploring their options. Sure, having a large base of operations has its perks, but are the rental rates truly worth it? Given how tumultuous a time a small business’s first year is, spending the bulk of your profits on rent is likely to be disheartening. If you’re truly committed to having a large workspace, consider starting with a smaller office and upgrading to more spacious digs if your enterprise proves successful.
In the digital age, a growing number of small businesses are coming to realize the benefits of telecommuting. For starters, with the COVID-19 pandemic getting progressively worse, allowing employees to work from home helps slow the spread of the virus and keep your team members safe. Secondly, being amenable to telecommuting can help you save money in a number of areas.
As previously stated, large office spaces come with large rents, and the fewer workers you have onsite, the less space you’ll need. So, if you’re based in an area with excessive rental rates, you stand to save a small fortune by allowing employees to work remotely. Additionally, if you provide beverages and refreshments for onsite workers, embracing remote work will mean spending less money on snacks. Letting people work from home is also associated with lower energy and office supply costs, and as any seasoned entrepreneur can attest, every penny counts during that first year.
Work with Contractors
Going overboard with full-time hires can quickly eat away at a fledgling business’s meager finances. Even if you’d like to have a robust full-time workforce, there’s a good chance that your budget simply doesn’t match your ambitions. With this in mind, consider using freelance contractors for jobs that don’t require a full-time presence. This will ensure that you only have to pay for certain services on an as-needed basis, thus helping you conserve financial resources. Should you come across any freelancers whose work is consistently stellar, you may want to consider offering them full-time positions when and if your business is in a position to do so.
Effective money management is crucial for fledgling small businesses. The financial decisions a new business owner makes throughout their first year can play a decisive role in determining whether their enterprise sinks or swims. While there’s no end-all solution to the financial hurdles faced by small businesses, there are numerous steps entrepreneurs can take to efficiently manage their resources. Fledgling business owners looking to ensure the long-term solvency of their enterprises would do well to consider the measures discussed above.