Saving money is essential to start a small business. Having sufficient finances helps ensure a startup’s long-term viability and success. However, if you plan to fund your own business, it pays to scrimp together every last penny, reform your spending habits and carefully examine your finances.
Is there a ready-made blueprint for saving money? The short answer is no. Everyone has a bootstrapping method that works best for their needs. But there are a few solid strategies that can help you start cutting costs, save money, and quickly launch your business. Let’s review some of the most popular saving methods.
Get Rid of Debt
Hefty debt is a financial burden you don’t want to have when you’re starting a business. Whether it’s student loan or credit card debt, it is important to repay this debt in full as soon as possible. This allows you to start saving for the future.
How do you get out debt? Run a quick calculation on how much interest your loan costs you each year. Compare it to the interest you receive on any other outstanding investments. If the difference is significant, start learning how to pay off loans with high interest rates right away.
Repaying any outstanding debt takes the worry offer the table. You can save money to start a business and know this money will be allocated specifically to the business. Being debt-free can also be a great confidence boost. You have more money to budget towards the business. This allows you to start making plans and exploring different opportunities.
Reduce Discretionary Spending
How much disposable income do you have, and spend, each month? Starting a business means knowing the amount of money you earn and tracking your average monthly spending habits. Reviewing your budget is helpful because it allows you to track spending and set reasonable expectations. Once you start following a budget, you may begin to realize that you’re spending more than you can afford. Adding some discipline to your spending habits will help you reduce personal expenses and put the budget towards your startup.
One of the easiest ways to reduce discretionary spending is learning how to save cash. Think about your current spending habits. For example, these may include drinking and eating out, paying for monthly entertainment streaming subscriptions, and online shopping. What are you buying that you need? Where can you scale back on what you don’t need? Work through your expenses. Create a list where you may reduce areas of spending or get rid of them entirely.
Discretionary categories like food and entertainment are expenses that can quickly add up each month. Focus on your needs rather than your wants. Stick to this spending budget. Then, allocate extra funds to the business.
Once you create a budget for spending, start thinking about savings. One of the simplest ways to begin is by automating your savings.
Making automatic deposits into a savings account is quite simple. For example, set aside 5% or 10% from every paycheck. Arrange for an automatic deposit to occur on your account. The timeline that the deposit occurs may depend on how often you’re paid and your own personal preferences.
For example, let’s say you receive pay biweekly on Mondays. Schedule a percentage of this pay to automatically transfer to your savings account by Friday. Remember: the timing these deposits occur will differ for everyone. What matters is consistently tapping into, and saving, extra funds with every paycheck. Automating savings prepares you to invest in the business — and this is especially crucial when a new business opportunity arises!
Understand How Taxes Work
You don’t need to know everything about taxes before starting a business. However, it is a good idea to get familiar with tax deadlines and opportunities for tax benefits with your small business. Some areas you may focus on include the following:
- Incorporating the business. You may choose to form an LLC. Or you may incorporate as another entity formation that provides tax benefits.
- Quarterly estimated tax payments. Will your small business need to make these payments? If so, what is the tax payment timeline?
- Tax deductions. This is applicable for incorporated businesses and self-employed workers. Which deductions may your business be eligible to receive?
It’s okay if you feel unsure where to begin. This is the perfect opportunity to speak with a tax professional. Tax professionals, like accountants and CPAs, may review any questions you have and provide you with solid answers. They may also be able to point out more tips for saving during tax season. A great tax pro will help you conduct tax year prep year-round.
Now is the time to look for discounts and use coupons! This is a great way to save money to start a business.
Shop around for the best deals. Sign up for newsletters that offer promo codes and discounts. Seek out services where you may rent office furniture. Buy in bulk to cut back on expenses. Work with local vendors and reach out to suppliers outside your area. These suppliers may offer shipping and bulk discounts that are less expensive than local vendors. All of these approaches may add up to significant savings for your business.
Go Green (and Save Green)
Going green is great for environmental conservation. In addition, it is also a good financial decision. The more energy-efficient your workspace is, you may pocket the savings from electricity expenses. Here are some tricks you can use to go green:
- Use LED lightbulbs
- Print on both sides of the paper
- Turn off equipment when not in use
- Reduce paper waste and cost
- Shop at consignment stores.
In addition, consider changing your personal habits to meet professional habits. Consider biking to work instead of driving each day. You will feel healthier, skip traffic jams, and decrease expenses put towards paying for gas and parking spots.
Starting your own business is an exciting process and an expensive endeavor. It often requires a change in lifestyle and spending habits. As such, how you decide to spend your money is a crucial factor. This determines whether or not you will be successful.
Some entrepreneurs may have the cash to invest and turn their small businesses into billion-dollar enterprises. However, most work with more modest budgets. The rational approach is to create a savings game plan. Budget, repay outstanding debt, gain an understanding of taxes, and conserve resources. If you follow these tips, you will save enough money to start a business and create a sizeable nest egg for emergencies.
Dardan Shehu is a freelance writer who loves writing about personal finance. He avoids debt when he can and pays it off quickly when he can’t, and he’s only too happy to suggest how you might do the same and end up saving money. He is currently writing for the blog at Credit Summit.