Tuesday, October 15, 2013, AM | 2 Comments
Starting a new business requires a large amount of work and some financing. Cutting costs wherever possible should be something every new business owner thinks about on a daily basis. Reducing overhead and creating a more efficient company will provide more capital for emergencies and long-term investments in employees and assets.
Four tips will help new business owners to cut costs.
Use a Virtual Office
A major expense for many new businesses is a physical office space. Traditional offices generate large amounts of overhead through rent, utilities and other fees. Modern technology makes it possible to operate fully through a virtual office.
All employees collaborate from home online using groupware, voice over Internet protocol (VoIP) and even teleconferencing. This lowers the cost of overhead every month and gives new workers more freedom.
Monitor Labor Costs
Human resources (HR) and labor costs can quickly consume a large portion of the business budget. It is important to use an HR management system (HRMS) to track labor costs, taxes and payroll. HR software from BambooHR can provide real-time tracking of labor costs and other HR spending.
Using an HRMS system also makes it easier to hire and manage different types of workers such as contractors or temporary employees that cost less. HR software has the added advantage of making payroll less costly to implement and perform.
Outsource Instead Of Buying Assets
Part of starting a new business is determining the right capital expenditures. Purchasing large assets can hurt a budget before a solid revenue stream is established.
One way to cut costs is to outsource some parts of the business instead of handling them internally with costly assets. Third-part logistics (3PL) providers can perform manufacturing, warehousing, transportation and procurement for a fraction of the cost of purchasing the assets to do the same internally.
Similarly, managed cloud-based services are less costly than paying for physical servers, network gear and information technology staff. Outsourcing to call centers or other services will lower operating costs.
Start With Low-Cost Marketing
New businesses need a marketing plan. One way to lower startup costs is to begin using low-cost or free marketing channels. Social media is a good place to start that will help to build a strong brand. Opt-in email marketing costs very little and builds the perception of expertise.
Public relations efforts or guerrilla marketing can provide a large amount of free advertising if done in a creative way. Although marketing budgets will need to increase over time, starting small can help a business remain financially stable.