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Startup entrepreneurs face some of the toughest odds when it comes to achieving success. With 90% of startups failing — more than half by Year 3 — there’s seemingly little hope for those looking to start their own company. Yet, small business owners are vital to the U.S. economy. These mom-and-pop shops make up for nearly half of the country’s working population. That said, it makes sense that so many entrepreneurs go on to pursue their dreams despite the risks.
So what’s the key to not just surviving but thriving as a small business? Hacking your budget. Every penny counts when you’re just starting out, and making a few simple adjustments can really save your startup some cash.
1. Marketing strategies
Many small businesses get caught up in implementing a wide variety of marketing strategies to engage their target audience. Yet seeing a single ad can often prompt consumers to make a purchase. It all comes down to how, where and when you market to them. The cheapest and often most effective route is through social media.
Nix traditional advertising and hyper-target ideal clients for free using Facebook, Instagram and even Snapchat. Simply create a captivating post, add it to your account and wait for people to engage with it. When they do, be responsive and answer any questions or concerns they might have. Encourage them to like, share and comment so more people see these posts.
Creating collaborations with startups that share similar values can also cut costs and increase reach, especially during promotional periods. Brian Evans of BDE Ventures suggests looking for partners with audiences in a parallel cluster. In other words, find partners that are different enough to give you leveraged exposure to a substantial number of new potential customers.
Partnerships can also help startups save money by providing access to technology or other resources that would be too expensive to develop or purchase on their own. However, it’s essential that you only form alliances with those who share the same values and aren’t in competition with your brand or business. Otherwise, the deal may backfire and create dissatisfied clients and employees.
3. Customer service
Did you know that word of mouth generates five times more sales than paid ads? This free form of advertising also happens to be the most powerful. Even negative word of mouth can cause ripples for your business, with 26% of people completely avoiding brands their family and friends share negative stories about.
Obviously, the customer experience is crucial to your success as a startup. Luckily, you don’t have to spend a fortune to keep them happy. You simply have to deliver great customer service. Take feedback seriously, send thank-you messages, manage complaints gracefully, and reward loyal customers with special offers. These simple strategies don’t cost much, and the payoff is well worth the extra bit of effort.
4. Inventory management
Many startups have a problem of stocking either too much or too little inventory in the first few months or years after they open. Both scenarios waste time, space and money, which is why it’s so important to take a proactive approach to inventory management.
Adjust your strategy to include artificial intelligence and machine learning. These technologies can help you analyze and predict consumer demand so your warehouse is always stocked with just enough inventory. Sure, the software might require a significant initial investment, but it’s likely cheaper in the long run. Weigh your options and factor inventory management into your budget so you aren’t hit with expensive stocking emergencies later.
5. Spending habits
If you’ve yet to make a detailed budget, now’s the time to do it. Organize your personal and professional finances before launching your startup to make sure you hit the ground running. Then, cut costs any way you can to save money and reinvest it into your business. Shop around, haggle, barter and negotiate, and use free and discounted services where you can. Google+ Hangouts, Skype and Zoom all have versions you and the team can utilize for free.
As your business grows and you create different departments, you can get a ghost card to monitor and track spending more accurately. This method also allows you to set spending amounts that differ between departments and individuals and save hours of reimbursement time.
Should you buy or lease equipment? Odds are good you’ll need a photocopier, printer and computer, at the very least. If you expect they’ll break or require frequent maintenance, leasing might be the more economical option. However, if you have the cash to purchase the equipment outright, you could save even more in the long run.
Buy secondhand or reconditioned items to cut costs without cutting corners. This way you still get the model or specs you need without paying the market price. You might also compromise and buy a cheaper version with the intention to upgrade a few months down the road. Look for deals on previous models or avoid the whole fiasco and have your employees purchase their own equipment to lower overhead costs.
If you already have a team of employees, you know how expensive it is to keep good workers around. However, it is entirely possible to save your startup money as it grows by training existing employees instead of hiring more people. Teach them new skills so they can wear multiple hats and give them a raise to compensate for their newfound know-how. Ultimately, this adjustment is much more affordable than attracting, training and paying a new group of team members.
Maybe you haven’t built a team just yet and are looking to outsource work instead. This option is even more economical, as freelancers and independent contractors often cost less than permanent employees. Sure, you might pay a higher hourly rate. But you’ll avoid paying payroll taxes, unemployment insurance, workers’ compensation and disability, all of which can easily add up to much more than a contractor’s salary.
8. Energy consumption
Nearly 70% of Canadian and American consumers believe it’s important that brands are sustainable and environmentally responsible. Many are even willing to pay more for eco-friendly products and will avoid brands that don’t offer such items, so going green is a no-brainer for startups that want to make and save more money.
Small adjustments, like turning off the lights when you leave a room, installing low-flow water fixtures, and providing recycling bins are a great place to start. Keep equipment on a power strip and turn it off, too, when not in use. Open windows to increase ventilation and limit AC use during the summer, and choose an office with good insulation to keep energy costs low during the colder months.
These solutions cost little to nothing but make a huge difference for the environment — and your bottom line.
Cut costs, not corners
Adjusting your budget will take time, effort and attention to detail, but when all is said and done, it’s key to minimize spending and save your startup money. The trick is cutting costs without cutting corners.
Your clients and customers deserve quality, and it’s your job to give it to them in the most economical way you know how. Weighing your options and prioritizing their needs will help you make the best decision so you can nix unnecessary expenses and continue to serve the community for many years to come.