Starting a new small business is not for the faint of heart—I should know. Eight years ago I went into business for myself as a speaker. Five years ago I launched a small nonprofit. And three years ago I went full time as a freelance writer. It would also appear I’m not alone in my love for being in business for myself. According to a 2012 Forbes article, as of 2011's data, each month 320 new businesses form in the United States. Annually, that averages out to more than half a million new businesses. Wow! Unfortunately, statistics also prove that just one in five new businesses will still be viable five years from their startup date. What goes wrong with such startling frequency?
In most cases, it boils down to cash, or a lack thereof. Yet America increasingly relies on new small businesses for jobs. The Small Business Association reports that small businesses provide an estimated 66% of all new jobs annually—and have since the 1970s! Because of these two facts—that just 20% of all new startups will survive beyond the five year mark, and yet the future of employment seems increasingly to lie with startups—I’m always researching ways to avoid overspending in the name of doing business. If you’re considering launching your own venture or are already running a small business and want to ensure you don't overpay on fees, then perhaps my research might help you too!
1. Hiring too many in-house employees
One of the most common new business startup fees is hiring too many employees. This is also why it’s so critical to ensure you’re ready to wear the many hats of a small business owner. You won’t have regular hours. And at least at first, you’ll have to step outside your comfort zone and tackle everything from advertising to sales to accounting and the IRS. Consider outsourcing functions you absolutely can’t do yourself (monthly bookkeeping and year-end accounting are common choices).
2. Pricey business services
From conference calling services to secretarial services, website building to phone systems, today you can access a wealth of cheap or free online resources that are fast replacing traditional pricey brick-and-mortar business helps. Here’s a list of some great resources that can get your new business off to a strong start:
- Virtual office systems: The Small Business Association (SBA) is now recommending virtual office systems for small businesses because these services are cost efficient for what they offer. They help you implement a full service phone system without paying for a brick-and-mortar office. You can customize a package for your needs—you may just need a virtual phone system, or you may want access to a conference room and mail delivery services, or some other combination.
- Virtual assistants: Virtual assistants can be hired by the project, the hour or with a retainer. Here you pay contract fees only—so no expensive overhead to deal with. You can hire someone just when you need them. Try these great services.
- Build-it-yourself website and blogging software: There’s no reason to pay a developer today when you can use the host of free or low fee build-it-yourself web services instead. Here are some great ones:
3. Overpaying on supplies
Whether you own a restaurant and are negotiating prices for bulk produce or a cloud computing storage provider building your cloud network, for every penny you overpay on supplies, you take another penny away from your bottom line. Here are ways around this:
- Go paperless: Not only will you save the trees, but you’ll save money too!
- Use what you have and shop sales for the rest: Garage and estate sales, Craig's List, Amazon and even the contents of your own garage can get you up and running—you can fancy up your office later when your business is profitable.
4. Old school advertising fees
Today the Internet has literally up-ended the way small businesses market and promote their products and services. Unless you’re part of a franchise operation that has specific requirements for how advertising is placed, you can advertise like crazy for just pennies—and sometimes for free!
- Social media: Today, sales and customer service takes place in real time. Use Twitter, Facebook, LinkedIn, Instagram, FourSquare, Yelp and other tools to keep your business visible and responsive.
- Website: If you don't have a friendly, easily navigable online presence, you’re missing out on the best of all advertising opportunities (see #2 here).
- Blog: Blogging and "vlogging" (video blogging) is a staple of advertising and marketing today. Get a blog, keep it current and be sure your content is relevant and engaging.
5. Not taking all deductions you qualify for
This is a huge issue for small business owners today. The IRS (Internal Revenue Service) has instituted a host of deductions and credits designed to serve as incentives for new business startups. You can deduct everything from mileage to home office space—even the cost of employing family members! Here, consult a tax professional to be sure you get the maximum deductions—it may cost a bit more, but your savings will more than make up for it.
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