Small startups with big ambitions seem to spring up in droves every year, with many delving
into the entrepreneurial world with often unrealistic expectations.
While it’s empowering to have a forward-thinking focus from the get-go, staying enthusiastic
and financially afloat during your endeavour’s first year is just as important for success.
Cost reduction throughout the initial startup periods of any business is crucial, with many
small business owners taking out loans they can't afford or just simply overspending.
Let’s look at a few common pitfalls and our six cash-saving strategies designed to ensure
you don’t wind up being added to those already-discouraging statistics.
Make Yourself Accountable for Your Financial Goals
Putting together a financial plan seems like it should be every business owner’s first step,
however, such a task can quickly become overwhelming if they have little to no experience.
Setting out clear and realistic financial goals during your first year in business is imperative,
placing emphasis on the balance between a challenge and a complication. Attempting to
overachieve too soon can be detrimental, meaning prioritisation is the key to moving
between the stepping stones.
Undertaking a self-assessment of where your business is, where you’d like it to be and what
has to be done to get there reestablishes accountability (and even motivation), towards
financial success.
You should be calculating the following at the very minimum as a fail-safe strategy when
setting up a new business:
● How much the business needs to survive during the first year?
● Sales projections
● Set up costs
● If you exceed sales projections, what’s next?
Establish a Network
Your professional network is your lifeline to so many customers, clients, potential partners,
industry information and more. Saving money by offering your products or services to other
businesses you connect with is a pretty common practice among the startup community.
Oftentimes you’ll be able to find a valuable industry connection or at least someone who can
point you in the right direction just by attending networking events and sprucing your
business.
These people can also prove to be a wealth of information, as they can provide you with a
more accurate picture regarding what it actually takes financially to succeed within the same
or similar fields.
Using social media to join groups and attend events to meet people is likely your best bet
early on. It’s all about utilising multiple sources of information, learning from others’
experiences and getting a full, realistic grasp of what to expect along your journey before
aimlessly spending big dollars.
Adopt Freebies
You’d be surprised by what you can find for free in terms of apps and tools. Software and
SaaS platforms can run you a fortune and if you can incorporate something into your game
plan for little to zero dollars, then why not?
While hiring professionals and other employees are likely one of your goals down the track,
free apps, online tools and courses should help get your finances on the front foot in the
beginning.
The initial stages are loaded with trial and error, so it’s important to mitigate financial risk.
This way, if things don't quite work out at this point, at least you haven't eaten too far into
your budget.
Look for apps that can create things virtually for free like logo design and be sure to make
use of those free trials too!
Understand that Market Research is an Investment
Got a big idea you’re just urging to share with the world? Unfortunately, skipping the market
research step and heading straight into production just doesn’t work.
An immense amount of time, money, effort and resources may be wasted if you jump right
ahead into trying to sell something with a limited associated market.
Invest some cash into research and development, ensuring your product is meeting demand
and expectations before thinking about sales and profits. Product validation is a crucial part
of any new product’s or service’s success, so knowing how to price them is also super
important.
Don’t Overspend on Advertising
The reality of online and social media advertising can be discouraging for fresh startups,
especially when your wallet’s a little on the thin side to start with.
Throwing more and more money at online ad space in an attempt to secure a wider
customer reach usually isn't the answer in the beginning.
A general rule of thumb is to spend no more than 10% of your total budget on marketing and
advertising in the first twelve months of operation - keeping it around 5% is even better!
Here’s where your efforts should be focused in the short term:
● Upgrading your website and improving its SEO rankings to drive organic web traffic
● Grow and overhaul your e-Newsletter game by offering discounts or freebies
● Rewarding loyalty to retaining recurring customers as part of a long-term strategy
Get Tax-Savvy or Hire a Pro
Tax obligations can be more or less complex depending on the operational nature of your
business and understanding them also allows you to save some money as well. There are
many ways small business owners can reduce their taxable income within their legal rights,
and hiring a tax expert for your first return could make all the difference.
In addition to learning more about Australian business tax obligations, it’s critical to also
ensure you’ve got an emergency or “rainy day” fund at the ready at all times. As seen above,
the main reasons small businesses and startups fail within the first twelve months of
introduction are simply poor financial management and an underestimation of what it actually
costs to set up, operate and maintain a new business.
Having a bookkeeping professional by your side throughout your journey can mean the
difference between knowing where to reduce costs and overspending to the point of total
financial failure!
Contact Ironbark Industries Bookkeeping today to discuss our bookkeeping services, your
specific requirements, or any other financial management enquiries.
