The Pursuit of Capital
It is the nature of start-up and growing small businesses that there is never enough capital. Finding the money to start a company is almost always a real challenge, particularly in today’s difficult economic climate. Companies are financed with either debt or equity and there are very few lenders today willing to gamble on small businesses. Giving up equity in a start-up is a difficult choice because the valuation is so low it means giving up a large slice of the company.
Even if sufficient funds are secured to start a business, the more successful it is and the more it grows, the more the owners will have to find even more capital to continue forward. With increasing inventories, staff and receivables, even a growing profitable company has to search for every way it can to survive financially.
Saving on Expenses
With adequate capital being such an issue, taking aggressive steps to control expenses and overhead is an important discipline to develop. Many small business owners and proprietors tend to put the financial issues low on their list of priorities. They think that the key to success is generating sales and everything else will take care of itself. While that is important, successful small business owners find a way to deal with all the essential issues involved in building a company that is successful over the long-term.
The first and most important step in controlling expenses in your start up is to know where the money is going. That means you need to have timely and accurate financial reports prepared each month. Take the time to carefully review every expense item and understand where your money is going each month. Watch for growth in expenses from one month to the next and attempt to achieve savings in each expense category.
Develop an Overall Plan
Of course, there is only so much you can do to control expenses – you want to grow and that means you will spend more when you are successful. It is simply wise to get the biggest bang for every dollar going out the door. That means having a mindset that is focused on saving dollars wherever possible. If you and your team focus on this issue, every dollar you save is one that you don’t have to borrow or give up shares for.
Here are six tips to save money in your start up company:
- Control normal office expenses. As we just discussed, these expenses are a fact of life for a growing business. But you can be smart about them. For example, consider the cost of your printers and toner cartridges. You may be able to outsource this function and save substantial dollars. Manage and involve your staff. Personnel costs are the single biggest expense for many businesses. Don’t allow your staff to become bloated with underperforming workers. Clearly define the jobs to be done and have only enough manpower to achieve the tasks needed. Also, listen to your people. Make sure they are expense-conscious and provide their inputs on how to cut costs and save money.
- Control capital expenditures. Don’t spend money on anything you don’t need. A start up simply doesn’t need a fancy new conference table. Buy used whenever possible and consider leasing for more expensive equipment
- Use office space efficiently. Especially when growing, it is easy to add too many fixed costs, such as your rent and lease costs. Don’t pay for more space than is absolutely needed to work productively.
- Collect the money owed you. Many businesses are glad to let you finance them by not paying their bills. Stay on top of your receivables. A sale does not help your company until the money is in the bank.
- Use technology. This is a major competitive factor today. From marketing to virtual assistants, using the right technology will improve efficiency, productivity and profitability. In some business segments, you simply cannot succeed without the right use of technology.
Small business is demanding but rewarding. Control your expenses to improve the chances of succeeding.