The first year of your business’s operation is arguably the most important, especially since so many businesses go under during this critical startup phase. One of the most important tools to your success is to stay lean and keep costs to a minimum to focus on operating efficiently until you have consistent revenue.
How do you do it?
Choose the Right Location (If You Truly Need One)
If you want to stay lean, one of the most important keys is choosing the right location— if you need one. Office expenses can be catastrophic, taking money from your business every month through rent, utilities, and secondary expenses like office supplies. If you choose to work in an area with a relatively low-cost basis, you could easily save thousands of dollars every month.
It’s true that choosing a cheaper area has some disadvantages. Your brand might not get as much visibility, or you might be less accessible to your most important customers. Accordingly, you’ll need to consider this decision carefully.
However, it’s also important to recognize that many businesses have gone fully or at least partially remote, for going the need for any in person establishment. If you can get by without an office, you can operate even leaner – and remember, you can always upgrade to an office in the future when your company is making revenue more consistently.
Reduce Your Utility Bills
There are many viable ways to keep your utility bills low. You can buy more energy-efficient appliances and devices. You can carefully control the flow of electricity so you don’t have things running when they aren’t necessary. You can educate and train your staff members to avoid wasting utilities unnecessarily. You can even install features designed to minimize your heating and cooling needs, such as trees that shade your building so it stays cooler in summer.
The end result of all these strategies is lower utility bills, potentially saving you hundreds of dollars every month.
Hire Only Who You Need (and Hire Smart)
One of your biggest expenses will be labor, so you should focus on hiring only those you need and be as intelligent as possible. Hiring fewer people and paying those people less can give you access to the support you need without financially jeopardizing your business.
One key strategy here is to focus on hiring generalists instead of specialists. Generalists tend to be a bit cheaper than specialists, and yet they tend to be more flexible. You’ll miss out on some of the advantages of having specialists on your team, but you’ll get away with hiring fewer people and distributing responsibilities more favorably.
It’s also important to hire based on talent rather than experience. The more experience a person has in the field, the more money they can feasibly demand; however, many less experienced people are equally talented and capable of helping your business succeed.
Focus on a Narrow Target Audience
Another key strategy is to focus on a narrow target audience. The more specific your niche is, the less competition you’ll face and the easier it will be to make sure your marketing and advertising messages are relevant. In short, you’ll get more “bang for your buck” in marketing, advertising, and sales and probably sell more products and services. If you’re concerned about narrowing the scope of your business, remember that you can always expand your target audiences in the future.
Lease Your Equipment
Consider leasing instead of buying if you need expensive, specialized equipment to achieve your business goals. Leasing has many advantages, such as helping you avoid the need for upfront capital and giving you access to another company’s maintenance schedule. Leasing is a no-brainer for many business owners attempting to save money in the first year.
Partner With Other Local Businesses
Consider partnering with other businesses to cut costs even further. Instead of paying for all the products and services you need, you can incorporate a kind of barter system.
Negotiate Aggressively
Negotiation can save you a lot of money (and help make you more money at the same time). Try negotiating for almost everything that your company has to buy; you might be surprised how much money you can save this way.
Your first year in business is going to be a challenging one, both financially and mentally. But if you can manage to stay lean with strategies like the ones above, you can maximize your profitability and set yourself up for many years of success in the future.
