A common worry among new or aspiring business owners is overhead – the cost of running a business. While it’s true that any business is going to have its share of necessary expenses, avoiding unnecessary ones is key to growing a sustainable business, especially in this “new” economy.
Here are a few tactics I use in running my digital marketing agency near Chicago, and because of them my clients appreciate a fair price on services, and I am able to have a high profit margin.
- Work from home
- Don’t buy tech you don’t need
- Skype when possible
- Stay in your own city for conferences and networking events
- Take advantage of all deductions (mileage, home office, cell phone bills)
Don’t get me wrong, the thought of a glass-walled office downtown is very tempting to me, but not when I look at the cost’s impact on my bottom line. Because I am willing to work out of my home, even with all of its distractions (laundry, kids, spam calls), I save hundreds if not thousands per month in leasing fees, utilities, and furnishings for a remote office. I can pass this savings on to my clients, pocket the extra profit, or even reinvest in the business in other ways that pay greater dividends.
Especially in my industry (digital marketing), the temptation of tech toys and their promise of higher productivity is extremely tempting. But before I make a purchase – a new phone, a new laptop, an iPad, etc. – I carefully weigh how much this item costs vs. how much incremental value it will bring to my services or how much time it will save me. If I can justify a purchase with increased value or productivity, then the purchase may be worthwhile. If not, then the new toy is as good as cash down the drain.
Gas. A cup of coffee. Lunch from the cafe down the road. These are all likely expenses if you travel to just one meeting. Have that meeting via Skype instead and you still get the face to face interaction, but you save at least $20 during that one meeting.
SXSWi is coming up, and is considered a “must attend” for folks in my industry. But, travel expenses from Chicago (my home) to Austin are steep – I’d be out $1500 in just a flight, a room for the week, and an event badge. In comparison, Tech Week is held in the summer in Chicago each year, and has similar topics covered. I’ll save over $800 just by attending Tech Week instead of SXSWi, and will likely make better quality business contacts than if I were to travel to Austin.
If you do live near a metro area, search there first for industry conferences and general networking events. Avoiding the high cost of airfare and hotel rooms is low hanging fruit when it comes to reducing company expenses.
Accounting is a painful thing for most small business owners. But, if you think of yourself getting paid to do it well, then going through the painstaking process of researching and listing all of your possible deductions is a process you may even come to enjoy. A few dollars here and a few dollars there really add up, and may decrease your owed taxes by a significant amount. If managing all of this on your own seems daunting, consider hiring an accountant (they usually pay for themselves in deductions they find) to help you through the process. Personally, I use Freshbooks to help me keep my expenses organized so that I’m ready to claim deductions each year, and I consider it a huge time and money saver.
In the end, don’t let the expense of running a small business scare you from starting one at all. And, if you already operate a business, look for opportunities to cut back, or understand what unnecessary spending may be happening.