Lower the cost of starting your business: 7 strategies to consider

Dustin Johnson
By Dustin Johnson

Every dollar counts when starting a business. A lack of financing or working capital is the #1 reason businesses fail. Poor cash flow management and bad planning are the usual suspects when a startup fails due to financial reasons.

Most business owners initially finance their businesses through loans or personal capital. If your financing isn’t infinite, wasteful spending will put your startup at greater risk of early failure. Sometimes, the businesses that survive in given industries aren’t always the best. Instead, they're the businesses that can stay afloat the longest.

Any strategy you can implement to stretch your dollar further gives your business more room to breathe. More breathing room equals more time to reach critical mass, aka profitability.

This blog post will share a few methods to lower the cost of starting your business.

#1 - Start tracking expenses early

No business is too small to begin tracking finances. If you anticipate that your business will succeed and grow (why wouldn't you), then understand that you’ll need to track your finances. The sooner you start this process, the better.

Tracking finances will help you make better decisions early on and save time. When you reach your first tax deadline after a few months in business, you'll thank your past self for planning. Being proactive could save you time and prevent tax penalties from late filing.

When tracking your expenses, you should separate them into three categories:

  • Fixed costs (marketing and development)
  • Variable costs (things like travel and subscription fees)
  • Miscellaneous costs (items such as office coffee and new furniture)

#2 - Commit to updating your finances

We get it; business is challenging. Sometimes looking at your leaky finances is just too much. A mistake many business owners make is hiding away from their finances when things aren’t going as well as they’d like.

Remember, the first few years in business are the hardest, so it’s perfectly normal not to make a profit for a while. A lack of profitability initially doesn’t mean your business won’t turn profitable in the future.

There are several options for items you can track:

  • Where most of your profit comes from (think 80/20 rule)
  • Expenses you no longer need but forget to cancel/remove
  • Expenses you’re overpaying for or not getting value from

Analyze your budget at least quarterly, if not monthly. The longer you wait between checking your budget, the more likely you’re in for some nasty surprises come the end of the year. 

#3 - Avoid penalties by saving for taxes

Even if you don’t think your business made any profit, you still need to file your taxes with the IRS. If your business makes enough profit, you may have a quarterly tax obligation. Quarterly taxes, known as estimated taxes, take a lot of business owners by surprise.

The IRS may penalize you for filing and paying taxes late. These late fees apply to your April 15th yearly tax filing and estimated tax payments if you receive income over $1,000.

#4 - Know your tax write-offs

You can’t escape your tax obligation, but you may be able to lessen your burden through tax write-offs. We see far too many businesses that miss out on deductions early on because they don’t invest in proper tax help or don’t take the time to learn about deductions available to their business type. 

Here are some startup costs that may be deductible for your small business:

  • Startup and organization costs: Startup businesses can deduct up to $5,000 in start-up costs if you’ve spent $50,000 or less. These costs include incorporation fees, legal fees, accounting fees, and organization meetings
  • Day-to-day overhead: Business expenses like office supplies, salaries, rent, and software are generally deductible.
  • Travel: If you travel for businesses, you may be able to deduct the expenses for these trips. If you have a business vehicle, the IRS allows businesses to claim 58.50 cents for each mile driven for business.
  • Marketing: Advertising costs like hiring freelancers, running paid advertising, or designing business cards are potential deductions.

#5 - Hire intently

Prepare yourself for a future with employees by detailing your hiring needs in your business plan. You can't fill every position you need to grow when you’re tight on funds, so you’ll have to get creative.

One option is to give equity in your business to your first employees.

Another example of getting creative is hiring freelancers and independent contractors to temporarily fill gaps in your business. For example, instead of hiring a marketer full-time, you can hire a Google Ads specialist if you’ve determined Google Ads to be your preferred growth channel. If they do a standup job, you could hire them full-time.

Upwork and Indeed are great places to find qualified freelancers.  

#6 - Talk with other business owners

If you’re a new business owner, you will embark on many tasks and journeys for the first time. Hiring your first employees or paying taxes for the first time may feel like Neil Armstrong taking his first steps on the moon. This exhilarating feeling can also lead you in the wrong direction, wasting time and money.

Seek mentorship from people who’ve been where you are and made it to the other side and from business owners in similar positions. Be open to asking how much they’re spending on expenses, how they’re budgeting, and clever ways they’re saving money. A 5-minute conversation could save your business thousands of dollars.

#7 - Take advantage of free/cheap marketing

Thanks to the internet and social media, everybody can have a voice and grow a sizeable audience. Your business can use this to your advantage by earning followers for free on social media or building a base of email subscribers. 

This tactic, guerilla marketing, has been around for a while, long before the internet was ever a thing. In the past, business owners would attend free networking events, knock on doors, ask for referrals, and even offer their services for free. These are all still viable options today.

Don’t go it alone

Starting a business is an exciting adventure that will challenge your faculties. If you’ve tapped out all your funding options and aren’t bringing in enough cash flow, you should take every opportunity to save money.

There are several free tools you can use to lower your startup costs. One of those tools is called ComplYant, a tax tool for small business owners who need help taking the hassle and confusion out of paying taxes on time. Sign up for ComplYant for free to never miss another deadline and save money for your early-stage business.

Dustin Johnson
By Dustin Johnson
Dustin Johnson is a Senior Tax Research Specialist at ComplYant. Prior to joining ComplYant, he spent over eleven years performing tax research at the world’s largest tax preparation company. Dustin holds a Bachelor of Business Administration and a Juris Doctor. Outside of work, Dustin enjoys biking and spending time with his family.

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