Seven Frugal Ways to Operate Your Small Business

frugal ways to operate small business

Building a successful small business can be very rewarding, but it can also be very challenging. Of course you want to make sure there is a market for your product or service, but honestly one of the biggest hurdles that people face is cash flow. You need start-up cash as well as money to pay for your day to day expenses, and money to pay for future expansion. Cash flow is the lifeblood of any business and critical to its success. Small businesses depend on their cash flow and when money is in short supply they may not be able to grow as planned, or worse yet, may end up closing their doors. To prevent this from happening it is important for small businesses to find ways to save on all their business expenses and manage their money well.

Calculate Your Break-Even Point

A cash flow is the single most important aspect of your business because it focuses on the actual cash that goes in and out of your company. Make a list of all the startup costs or one-time expenses, your monthly fixed and variable expenses, and project your sales to see if this business is feasible. Without knowing your costs and expenses, you will not be able to project your income needed to make a profit in your business.

Minimize Office or Retail Expenses

When you first start out consider if you can work from home. If that is not possible look for office space or retail space that is extremely affordable. When decorating, skip the fancy furniture, or skip buying the most expensive equipment. Within your work space always use energy efficient electronics and low wattage light bulbs.

Manage Inventory Closely

The more inventory you have in your warehouse or in your retail outlet the less cash you have on hand.

Instead of buying in bulk when you first start out, buy a small amount to test out the market. Always deal with suppliers that offer quick delivery, and watch each product closely so that you know when you need to reorder.

Avoid Using Credit Cards to Finance Your Business

Credit cards typically come with a very high interest rate and relying on a credit card to pay for your day to day expenses, or even inventory, is not the best idea. Instead, consider a low interest business line of credit. 

If you find that your cash flow is poor and your accounts receivable balance is high, you do have other options that you can turn to in an effort to boost your cash flow. Some businesses prefer invoice finance as a way to increase their cash flow. Invoice financing works well for businesses that sell large orders of products to customers on a credit basis of 30, 60 or 90 days. Invoice financing releases cash quickly so that you are not sitting and worrying about whether or not your customers will pay in time for you to pay next month’s expenses.

The less time you spend worrying about your finances the more time you can spend increasing your sales.

Use Your Resources Wisely

When you operate a small business you can save a lot of money by hiring good employees that are capable of doing more than one type of job. Look for people that truly enjoy working for a small business and are eager to help you grow your business.

For example, a person that can do office administration work including bookkeeping and marketing would be a great resource for you.

Market on a Shoestring Budget

One of the things that small businesses typically spend too much money on is marketing. If you want to be frugal and save money learn how to market your small business on a shoestring budget. Of course your marketing plan will be based on the type of business you have, but there are many ways to get the word out these days without spending lots of cash.

Skip Business Travel

Will your business require you to travel to meet with clients or to purchase products or equipment? Be smart about when you should travel and when another option such as a conference call may be suitable enough. The cost of business travel can add up quickly and should be limited to times when you truly need to meet with someone face to face or you need to physically be onsite. Otherwise, take advantage of a video call or just use email.


    • FI Pilgrim

      FI Pilgrim 11/12/2013 6:33 a.m. #

      I often wonder how I would market myself if I started a small web design company (solo, probably). It would have to be on a shoestring, that's for sure!

      • Sicorra

        Sicorra 11/12/2013 7:36 p.m. #

        A web design business is best marketed using social media along with a good portfolio of what you can do.

    • Michelle

      Michelle 11/12/2013 5:16 p.m. #

      Great post! It can be easy to get ahead of yourself and start spending a ton of money on your business. I know of many people who say things such as "oh, but I can just write if off." AHH!

      • Sicorra

        Sicorra 11/12/2013 7:37 p.m. #

        So true! Many people think they can spend simply because it is a write off. But you need to make money to write it off against.

    • krantcents

      krantcents 11/12/2013 5:20 p.m. #

      Having sufficient capital when you start out is usually the biggest proble for new businesses.

      • Sicorra

        Sicorra 11/13/2013 3:57 p.m. #

        Yes, in many cases that is true.

    • Corinne

      Corinne 11/12/2013 9:24 p.m. #

      Great post Sicorra! I think one of the huge benefits of starting a home business is that you can stand to save a ton of money. HOwever, as you pointed out, if you are not careful, you can easily go over budget and over spend.
      My writing business was started on barely anything. Now years later, I find myself investing more in resources and learning material. I have to actually consider my budget and think if I really need yet another Internet Marketing guide :)

      Have a great week! I have been so busy but I missed all you lovely ladies!

      • Sicorra

        Sicorra 11/13/2013 4:01 p.m. #

        Corinne, you read my mind. We miss you too. :-)
        I didn't realize that you have been doing your writing business for a number of years now. Good for you!
        It is definitely easy to spend too much on new learning material esp with everything you find on the Internet. All of a sudden a person can have all of these how to guides and their income is all gone. Important to be careful.

        Great hearing from you! Be in touch...

    • Erik Emanuelli

      Erik Emanuelli 11/14/2013 2:15 a.m. #

      Hi Sicorra,
      some valid points here.
      I think that having a business plan is the best way to ensure your company to survive...
      Having a plan B (or even C) in worst cases is important.
      Thanks for sharing!

      • Sicorra

        Sicorra 11/14/2013 4:05 p.m. #

        Thanks for stopping by Erik! Having a business plan that ensures you stay on budget is definitely important.

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