Undoubtedly, owning a startup can be exciting, challenging and rewarding. However, when you own the business that brings in your monthly income, it can be easy to mix personal and business expenditures. While every business can fail for different reasons, the founder of a startup needs to be extra vigilant when trying to find a balance between personal and business spending. When you are balancing funds for your family and for a startup, it is important to be vigilant of any spending and be aware of how to save money.
When your business is in it's nascent stages there are several steps you can take to make sure you don’t overspend and that you are saving as much as possible. These money saving tips will especially help those who are in the early stages of establishing a startup.
1. Don't quit Your Job
When you have just begun working for your startup, it is likely that you won't be drawing a salary every month. It may be the case that while you are able to draw a salary, the amount may vary from month to month in the first few uncertain months. For this reason, it makes sense to hold on to your current day job, or even a part-time job so that you have enough funds to live on for the time being, before your startup takes off and the profits start coming in. This is especially important if you have a family with children.
2. Be careful with funding
While the urge to buy the best technology that you can afford will be there when you first establish your startup, it really isn't always necessary. Instead, in the initial stages of establishing your startup, it may make more sense to lease office equipment instead of buying it as this will reduce your costs while giving you the same access to technology. Also, wherever possible, try using free software instead of buying new and pricey versions.
3. Manage incoming income
Make sure payments that are owed to you for services rendered are coming in on time because if they take too long it will certainly have a detrimental effect on your operating cash. When dealing with clients, it may be a good idea to opt for a payment after a maximum of a week or 15 days after delivery or even opt for a cash-on-delivery system. If you are going to be working on long-term projects, it would make sense to request 50% of the total payment upfront
4. Hire carefully
When hiring new employees, initially it may be helpful to hire independent contractors instead of full time employees since you won't be required to pay employee benefits to contractors. When you hire a full-time employee, you could even ask them to accept a lower salary in lieu of a stake in the company. It would ofcourse be wise to consult with a lawyer before doing this. Another option to explore when expanding the workforce is to hire interns. Look at the local colleges in your area and see if they have an internship program for students to gain work experience.
5. Free advice
Instead of spending large sums of money on legal advice, business mentoring or other advice that could cost you a lot, use your network of advisors and mentors for all the advice that you need. Getting truthful advice from experienced professionals in your field is exactly what you need to help you on your path to success.
6. Work remotely
When your startup is still growing and is in it's beginning stages, you can work from home and so can your employees. This will help avoid expenses related to renting an office space plus the many costs that accompany having an office.
7. Move in with your parents
While this may seem like an extreme method to save money, it is a great way to do so, if you can. This will help you have plenty of money that would otherwise go towards rent etc. which you could now put into your startup. Keep in mind that this move may be more difficult if you have children as their school etc. could be affected.
While saving money with the aim of establishing a startup is great, it is also helpful to know how to save money when you have a family at home. Every business owner must master the art of spending according to their earning potential and knowing when to save. Here are some great tips to save money at home:
- Coupons: Every major business gives away free products and services, and you may be missing out on some great deals simply because you are not looking in the right places. Follow big brands on social media for announcements related to coupons for great products or services which will allow you to avail freebies online. New companies that are entering the market often run great discounts for new customers.
- Carpool: Join your neighbors or colleagues who are travelling in the same direction as you. Take turns to carpool and you will save a lot on fuel alone.
- Keep it separate: Set up two different checking accounts for business and personal usage. Any income from business transactions should go into the business account and any personal income will go into the personal account. Never mix the two.
Why should you avoid mixing personal and business funds?
Unfortunately, having a startup also makes business owners prime targets when it comes to IRS audits. So why is it so dangerous to mix personal and professional funds? Firstly, it looks unprofessional and when you are dealing with a customer, it doesn't look impressive if as a business you use your personal credit card to pay for a business transaction. A potential client may lose faith in your expertise as a business owner.
Secondly, the IRS won't take you seriously and not separating your work and personal expenditures will make your business look like a hobby to the IRS, making any tax deductions that you have mentioned towards your business, questionable.
By following a few simple steps, a startup owner can ensure that they save a lot and make every penny count. It may often seem that certain actions only save a little bit, but over time, repeated actions will, in fact save you a lot of money, and in turn could make a huge difference to your business and to your personal expenditure.
Image Source: pinterest
