Keep your costs low, your revenues high and collect the money. Golden rules for running an SME successfully. But how can you get your costs down and keep them down? If you are running a startup, then revenues will take time to build. Costs are your biggest risk. Plan to start any new business with low costs and you will be giving yourself a head start.
The biggest cost for your business will always be your time. Time is money. The time it takes to get results should be your priority as an SME leader. Here are some business ideas for ways to save money.
Fixed business costs, such as rent, are constant whatever the number of goods produced or services rendered. Do you need an office for your startup? Why not work from home? Remember Jeff Bezos started Amazon in his garage. He wasn’t the only successful entrepreneur to start with lost costs.
Nowadays there are lots of other low-cost options like virtual offices. Renting an attractive office address where most of the admin is done for you by the service provider is a great way to get started. Check out options for shared offices like Common Ground.
Costs that vary with your level of output include wages and processing fees. These costs can escalate, sometimes rapidly, as your business scales.
Use freelancers when you are getting started. If that works well, then keep going. There is no need to have an unnecessarily high head count for your SME. Take a look at the figures as your business grows. Defining revenues generated by each member of staff is a good way to analyse costs. If one or two staff members are generating half your income, then look at whether you need any more staff. If you can let people go nicely without affecting the company culture, then this may help with saving on variable costs. Reward high performers whilst developing high potentials.
If you are running an online business that receives credit card payments, then you may be processing a high volume of transactions. Fees are only charged to a business if it accepts credit card purchases from customers. The credit card fees that are a percentage of sales (i.e., not the monthly fixed fee) should be considered variable costs. Take a look at Apps that will improve your business productivity like Total-Apps.
Try budgeting a small amount of money for membership dues with networking organisations like your local chamber of commerce. Set business goals for your participation in these groups to maximise value.
Some of these organisation provide their members with various kind of business-related discounts on things like insurance, loans, credit card fees and training.
Your accounts will suffer when demand gets fulfilled, but payment gets delayed. Customers forget to pay you and banks may hold transactions over a certain amount. Holidays can also cause payment delays. All these will hurt your financial bottom line and cause problems with fixed and variable costs.
Always have a healthy cash contingency to stop your business crashing. Set payment terms with your customers. Add penalties if necessary. Use your intuition to avoid bad paying clients.
When you look at ways to save money as a small business owner, first look at how you spend your time. From this, everything else should follow. Use your time to create effective small business ideas. Create a business strategy that will help you save more money. Then strategise realistic cost reductions and try out different ways to save money. Costs savings tips will help your business get started. Get going.