In the early stages of your new venture a lot of exciting things are always happening. First you have a new product that you are excited about; and second you have early adopters who are equally excited about your new product. However, besides the excitement and the joy of finally having gotten into the market after a long product development phase; you will also find yourself in an unfamiliar territory of business management. The biggest challenge comes in when you want to manage your finances in a manner that will keep your business sustainable without hemorrhaging it when still young.
As it is with many start-ups, you will probably have gotten some external sources of seed funding to roll out your business in the first early stages. The sources could have been borrowed funds from your family friends or other relatives. For the lucky few, you could have gotten some equity or debt investment from an angel investor in form of patient capital. Although rare, you could as well have gotten a loan from a commercial bank to roll out your operations for your new venture. Regardless of how you got your initial capital, you will have to report back on how you managed the finances; while ensuring that all the expenditures you incur have a direct impact on your business performance.
It is therefore a necessity that in your early days in business and even thereafter when you are growing at a high rate; you ensure that you are always operating efficiently. You should be able to maximize your output per unit cost by cutting down on any unnecessary expenditure. Sealing all loopholes that could be causing leakages in your business cash flows should always be your first priority when it comes managing your business finances. Below are 5 ways to ensure that you keep your expenses low while improving on your financial performance.
Do it yourself then scale up
At the very early stages of your business, you will need to be your own boss literary by doing much of the work yourself. You will need to do your marketing by yourself, run your social media accounts, do the product development and even do customer deliveries by yourself. By doing all these things yourself you will be minimizing your expenditures and creating a cash buffer for your business to be used when scaling up.
Lease rather than buy
Buying of equipment, machines, furniture and other business assets will require a huge capital outlay which you will in most cases not be having when starting out. Leasing therefore becomes a better option for you since you will only be required to pay a small amount phased out over a period of time. For mobility purposes, you might need to have a business car to enable you to be in meetings in time and deliver goods to customers faster. In such cases, you will need to keep the cost of the car low by ensuring it is well maintained at all times and find a cheap car insurance to minimize your insurance premiums.
Prioritize your needs
Not all things that appear useful to your business are needed in the early days of your new venture. You need to prioritize your new asset and systems procurement based on your immediate business needs. For instance, if you are running a small confectionery shop, having your own bakery is not a priority when starting out. You can defer that cost to sometime in the future when you have grown your customer base and sales are high enough to cover the purchase of the bakery equipment. In the meantime, you can be buying ready-made confectioneries from other bakeries and selling them as you build customer traction and loyalty.
Be smart when hiring
Salaries and wages form a big percentage of any business expenses. When starting out you want to keep them low by ensuring that you only hire for positions that are very technical; that your general knowledge cannot suffice. In addition, you can opt to work with part time employees who are paid on an hourly basis when they are needed.
Invest where you must
There are professional services such as legal and accounting that will contribute to stability in your business. For those you can outsource the services but also ensure that the costs are kept at a minimal level. Finally, only invest in things that will have a direct impact in the growth of your business in the short-run; and avoid investing in anything that will take a long period of time before its impact is felt in the business.