Financial solvency is an ongoing challenge for small businesses, most of which don’t turn a profit during the first few years. There are several reasons for this, including the basic challenges involved in establishing a client base, initial overhead, and other startup costs.
However, another reason that small businesses struggle with their budgets is because they’re overspending or just spending on the wrong things.
If you’re struggling to manage your business’s budget, it’s time to look more closely at these four line items. By reducing how much you spend on them or cutting them out completely, you may find your company’s budget is more sustainable.
It’s one thing to pay for floorspace if you run a traditional retail business that needs to display items, but if everyone at your company spends their days at desks working on computers, do you really need an office? The past eighteen months have proven that most businesses can successfully run remotely or using a hybrid setup. Instead of overspending on office space, consider a smaller space, renting a few desks in a coworking building, or shifting staff to remote work.
In the age of Software-as-a-Service (SaaS) tools, it’s easier than ever for businesses to try out new platforms, but it’s also very easy to purchase a subscription, only to stop using the service while still paying for it.
Do that a few times, and you’ll dig yourself into a financial hole. Make sure you’re tracking your expenses and assets carefully and don’t scale up your software subscriptions prematurely. Many small businesses subscribe to platforms they don’t really need or on a higher tier, despite not being ready for such advanced solutions.
Engage Outsourcing Options
One of the defining features of a small business is limiting staffing and, as a result, often a limited array of available skills. That’s okay! There’s no reason your company should be paying for full-time access to certain professionals, like accountants or IT support, when you just don’t need it.
Instead, outsource your IT needs and contract with a CPA to handle your bookkeeping and business taxes. If and when your business expands, you can weigh your changing needs, but this is the best strategy for businesses that are still getting started.
Massive Marketing Campaigns
Today’s marketing landscape is overwhelming, and it can be enormously challenging to figure out how to distribute your marketing budget to maximize reach and effectiveness. Do you emphasize social media, and which channels? Local or national? Video or basic graphics? Because there are so many channels and choices, small businesses often overspend on marketing out of a fear of making the wrong decision. Scale back and spend some time measuring impact – you might also consider briefly contracting with a marketing agency, which can support your company as it navigates this process.
Careful budget management is important for every business, but when you’re still getting on your feet, a certain decisive conservatism can be especially critical. Without it, your spending may spin out before you have a chance to reach a meaningful audience, so start trimming the financial fat without delay.