Reducing your Startup Expenses

Getting a small business off the ground can be difficult, especially if you don’t have the capital available. But if you’re savvy about your expenses, you can hit your stride earlier, break-even, and become financially sustainable in the long term.

What are the main expenses?

Let’s see if we can break down the main expenses, and how we might go about reducing them. It’s useful to categorise them in three ways: one-time, fixed, and variable.

One-time

A one-time expense is one that you’ll pay at the very start. For example, if you’re a tradesperson, you might invest in a van, and use it to drive from site to site.

Fixed

A fixed expense is an ongoing cost that remains consistent over time. So, if you’ve borrowed money to purchase your van, then you might end up paying down the loan via monthly payments.

Variable

A variable expense is something that changes over time. So, you might pay different amounts for your fuel each month depending on the distance you’re travelling and the cost of the fuel in question.

In practice, you can reduce your overall spending by making upfront investments that reduce your payments in the long term.

What can you claim back?

As a startup, you’ll be pleased to learn that many of your expenses are tax-deductable. If you’re working from home, then it might not have occurred to you to claim for things like the energy you’re using, or the vehicles you’re buying, which can count as plant and machinery.

Smaller items like personal protective equipment can also be deducted, which makes it much more practicable to keep your business safe, especially in the first few months and years.

Logistics

Sorting out your supply chains, and reducing your reliance on travel, can help to make your business more affordable to run. You might limit your expenditure on office space and equipment by renting, or by sharing it with another business.

Haggling

If you can drive down your costs, you’ll put yourself in an advantageous position. In many cases, you can do this simply by asking for a discount and many of your contacts will willingly provide you with one. Haggling is a habit that can save you a substantial amount in the long-term, so try to fall into it early on.

Be strategic with overheads

Among your most burdensome overheads are going to directly stem from the size and location of your premises. Working from home practices, obviously, will help to slash your rental payments on business premises. When it comes to warehousing, which is a substantial cost for many manufacturing and shipping businesses, developing good logistics from the start is going to help you significantly.