When starting or growing a business it is very easy to get carried away and start spending large sums on items that you may not need or overspend on things that you do. There are some key areas that you can focus on which can make all the difference between making a profit or a loss.
Here Bobby Lane, business agony uncle and partner at SSH LLP gives his top tips on where to look and things to watch out for to save costs.
Do look at your business processes and not costs in isolation.
If, for example you are importing your products from China the actual cost of goods may well be lower than producing closer to home. However you must also look at the costs of shipping and the time it takes to receive your products. If you have a much shorter reorder and delivery time, it will mean you are able to service your customers much quicker. If you are a retailer, restocking or getting in new lines could mean further sales.
Do look at getting freelance/contractors in
I have seen many businesses over the years which, having won new business, immediately take on new staff. Time and again business owners believe that their team are working at full capacity. This may well be the case but before you go and hire staff and add to your fixed costs look at where and how they are spending their time and if you really need them.
Flexibility in your cost base is the key both at the start or as you grow. Look at freelancers/contractors that may be able to assist on specific projects. This way you do not commit your business to long term fixed costs. But this also has its downsides – as they are not employees of the business they may share different work values than say a full time team member.
Do look at short term leases /serviced offices
Renting an office on a long term lease can be a huge expense as well as long term commitment. In most cases you will have to provide a rent deposit and give some form of security, possibly in the form of a personal guarantee. Also you may take a lease on a space that you outgrow very rapidly and could be stuck with an office that is not able to support your growth.
Whilst in the early rapid growth phases, look at more flexible options by using a serviced office or look at some of the short term deals that may be around.
Don’t get carried away when fitting out your shop or office
When fitting out your shop or office, make sure it is appropriate to your brand or business and don’t feel the need to spend to impress. You have to find the cash to pay for it if you are starting out and then make the profit to pay it back. Don’t put yourself under huge pressure before you open the doors for business.
Don’t feel the need to spend a fortune on a website.
If your website is for providing information then there are some fantastic templates and website builders that can come free with your domain. They are very easy to use and can be a great way of getting the business site up and running.
If transactional, there are some fantastic options available to build a website that can integrate with your stock control system and accounting system for a small monthly charge. Again these are very easy to build and if you can use a word processing package you can use these platforms.
The days are gone where you need to spend tens of thousands on a website, unless of course you are building a unique app or system.
Don’t feel the need to build a big admin department
Focus on building your revenue generating team. The provision of outsourcing services to SMEs has evolved so much over the last few years, so look to plug the skills gaps in the team by bringing in external experts in areas such as accounting, IT, legal and HR.
Don’t cut corners
Set up your business properly from the outset. Not having the right terms and conditions for customer contracts or the correct level of insurance could end up costing you a lot more in the long run.
Also don’t try and run your business on the back of post it note! Using spreadsheets and manual documents are no longer necessary with the introduction of some fantastic and reasonably priced cloud based accounting systems. Setting up management information systems is now easier than ever and well worth the small investment. This will allow you to make decisions based on information rather than guesswork.
Bobby Lane is business agony uncle and partner at SSH LLP.
Further reading on saving costs
