Today, I want to share 22 of my favorite ways to save money in your business.
When it comes to owning a business, your number one goal is to make a profit. There are two ways to do this: increase sales and/or decrease expenses.
While your major focus should always be on increasing your sales revenue, you should also spend some time and look for ways to stretch the money that you do have.
Top 22 Ways to Save Money in Your Business
What you will see below are my best tips and tricks. I have learned these things mostly through trial and error during the past 17-years. They are listed in no particular order.
# 1 Run Your Business From Home
If possible, run your business out of your own home. This will save you a lot of money in rent and utilities, plus you will be able to take advantage of the home office deduction. Here are some of additional benefits:
Less financial risk: Buying a building or signing a long-term lease for a traditional business is very expensive, scary and risky. When you start a business from home, you are not accruing any additional “rent” expenses. This saves you a TON of money.
More personal freedom: Depending on what you do, when you work from home you save yourself time from commuting. You don’t have to have set business hours. You can wear what you want and you have more flexibility.
Improved work/life balance: Working from home will give you a better quality of life. Plus, you can involve your family and always be home for dinner.
Better productivity: This might not apply to everyone, but I know I am much more productive working from home than working somewhere else. Why? Because I love my work environment. I feel comfortable and relaxed.
Reduction in overhead expenses: Working from home lets you keep your operating expenses at a bare bones’ minimum, which helps you save money in your business, reduce your financial risk and increase the likelihood of you being profitable.
The worst thing we can do is get a second job. The best thing we can do is start a home-based business ~ Dave Ramsey
# 2 Negotiate & Barter
In trade, barter is a system of exchange where participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Source
When you are purchasing things for your business, always try to negotiate or a better price. Ask if there is a veteran’s discount, a loyal shopper discount, a small business discount or whatever else might apply to your unique situation. Most prices are flexible. Besides, the worst thing you will hear is the word NO.
Also, if you are low on money, you could barter your services for the goods or services you do need. For example, a plumber might barter ten hours of their time to install a new bathroom at a SEO company, in exchange for the company building them a website and helping them with SEO.
# 3 Defer Payments/ Time your payments
One of the most important aspects of your business finances is managing your cash flow properly. By all means, pay your bills on time, but make sure you delay your payment as much as possible. Pay them by the due date, but not two or three weeks early. That way you have more cash in your bank account that you can leverage.
# 4 Don’t Hire Full-Time Employees
Employees are your worst nightmare. In many cases, they will lie to you, steal to you, and run your bank account empty. Plus, full-time employees come with COSTLY expenses. You will be much better off hiring part-time employees, or even better, independent contractors. You can also hire interns.
# 5 Outsource Non-Essential Functions
As a CEO, your time is valuable. Do not spend your $100 per hour time doing $10 per hour tasks. Learn how to delegate or outsource. Determine which tasks are most important (sales and getting customers) and hire other people to help you do everything else.
Do what you do best and outsource the rest. ~ Peter Duncan
# 6 Maximize Your Tax Deductions
Take some time and sit down with your bookkeeper or CPA and educate yourself on what you can and can’t deduct. You’ll probably have to pay for an hour or two of their time. Trust me, this is money well spent.
Never try to cheat the system, but always take EVERY legal tax deduction that you can. Not taking your deductions is like throwing away money for no good reason.
# 7 Have Trusted Advisors
Every small business needs a few trusted advisors. At a minimum, you want a good real estate agent, lawyer, insurance agent and CPA. You want these folks on speed dial and you want a good relationship with them. Any money you spend on them is tax deductible and is money well spent. This is one area you do not want to be cheap with.
# 8 Evaluate Each Business Expense Once Every 90-Days
Once a quarter, take a few hours and go somewhere quiet. Look at all of your business expenses for the past 90-days. Evaluate each expense. Do you really need it? Are there cheaper or better options? Are you being over-billed? Is there any way you can save money with that expense or eliminate it? Chances are you will find at least 2-3 expenses you can eliminate, or at least find a cheaper and better alternative.
# 9 Take Care of Your Customers
One of the best ways to save money in your business is to take care of your customers. Your customers are your greatest source of referrals. Treat your customers like gold. Stay in touch often. Have a good up-sell and cross-sell program. Have a loyalty rewards program and a referrals program. This can save (and make you) a lot of money.
If you don’t take care of your customers, your competitor will. ~ Bill Hooey
# 10 Form Strategic Alliances
Another great way to save money in your business is to form strategic alliances. This is when you team up with other local business owners and collaborate. You share customers and referrals with each other. You do business with each other. You barter and exchange services.
I’ll tell you this: when two or three entrepreneurs work together toward a common good, they can accomplish great things.
Seek out strategic alliances; they are essential to growth and provide resistance to bigger competition. ~ Sir Richard Branson
# 11 Lease a Copier
This is one of the best ways to save money in your business. For example, my wife and I have an eBay business. We print a lot of shipping labels each month. We were spending several hundred dollars per month on inkjet cartridges for our printer.
We shopped around and leased a printer for $113.55 per month. It comes with free ink for life. Plus, it is a LASER printer and prints a much better quality document. Talk about a win-win situation.
# 12 Buy Second Hand Equipment
You don’t have to buy everything brand new. Before you make any new purchase for your business, ask yourself if you can buy it second hand somewhere else for just a fraction of the price. It might not look “as good” as something brand new, but your checkbook will thank you for it.
# 13 Go Virtual
A virtual business employs electronic means to transact business as opposed to a traditional brick and mortar business that relies on face-to-face transactions with physical documents and physical currency or credit. Source
Go virtual. Have a virtual office. Have virtual employees or assistants. Put things on the cloud. Instead of owning your own computer servers, use a cloud based service. The more things you can do virtually, the better.
# 14 Deduct Your Mileage Expenses
Keep track of your business mileage is one of the fastest ways to save money in your business. Buy a mileage log. Before you drive anywhere, update your mileage log. Keep track of all of your business mileage. This one thing alone can save you thousands of dollars in taxes each year.
The Internal Revenue Service (IRS) released Notice 2019-02 providing the 2019 standard mileage rates. Beginning January 1, 2019, the standard mileage rates for the use of a car (vans, pickups or panel trucks) will be: 58 cents per mile for business miles driven, up from 54.5 cents for 2018. Source: IRS website
What does this mean? It means that if you have 20,000 business miles in one year, you would be able to legally deduct $11,600 from your taxable income. That is HUGE.
# 15 Fire Your Bad Customers
Not all customers are created equal. You should fire your bad customers as quickly as possible, and focus your time and efforts on finding more good customers. Why? Bad customers take your time, crush your profits and just make life miserable.
# 16 Work Less
If you learn to work smart, you can make more money per hour by working less. Make sure you take vacations each year. Spend time with your family. Pursue your hobbies. Why? Because if you lose your health, get divorced or end up hating life, you will lose most of the money your business has earned.
# 17 Max Out Your Retirement Accounts
Set up a SEP IRA for yourself and be sure to max out your retirement accounts each year. This will help minimize your taxable income and save you money! As an entrepreneur, you are allowed to invest more money in your retirement account each year than employees are. Take advantage of it!
The SEP IRA Limit Is Increasing in 2019. For those with money to spare, the SEP IRA contribution limit is increasing by $1,000 in 2019, from $55,000 to $56,000. SEP IRAs are traditional retirement accounts for small business owners and employees, including self-employed freelancers. Source
# 18 Pay Off Your Business Debt
Some people would argue that some types of debt are good. I personally don’t think so. If possible, stay out of debt or get out of debt as quickly as possible, so you don’t get stuck paying a bunch of interest or fees. Being debt free is something every business owner should strive for, if at all possible.
# 19 Get Organized
I probably should have made this tip # 1. You need to be organized. No, not everything needs to be dress-right-dress, color coded, or sorted alphabetically, but you do need to keep your business paperwork organized. Have some type of filing system for your taxes, receipts, invoices, etc. If you’re not naturally an organized person, hire someone for a few hours to help you get set up.
# 20 Buy Goods in Bulk
In certain cases, buying items in bulk can be a smart move. Make a list of all of the things you buy for your business and figure out how often you buy them. If it’s something you buy frequently, consider making bulk purchases so you can save money in your business! You might even want to get a Sam’s Club or Costco membership.
# 21 Do Not Offer Credit
Credit can be a good thing. In some businesses, you need to give your customers credit, because they are making large purchases. Whenever possible, try to avoid giving credit to your customer. You do not want to have an accounts receivable. Why? Because not all vendors will pay you. You could be stuck out to dry for the money, even though you delivered the goods on time and to standard.
# 22 Reinvest Your Profits
When you reinvest your profits back into your business, you do not pay taxes on it, as long as you are spending the money on tax deductible items.
Think of your business like a newborn baby. In the beginning, it needs a lot of love and attention. You need to nurture it, love it and protect it. As it grows, it becomes more independent, and needs you even less.
Whatever you do, do not make the mistake of sucking out all of your business profits for yourself. Reinvest that money back into your business, so you can grow it.
Profits are better than wages. ~ Jim Rohn
In review, these are 22 of my favorite ways to save money in your business. None of this is rocket science, but if you do the best you can to manage the money your business does have, you can make your business even more profitable.
What are your thoughts? What are your best tips on how to save money in your business? What do you do and recommend? Leave a comment below to let me know what you think. I look forward to hearing from you.