Small businesses are great. They allow individuals to follow their passions, be their own bosses and build their ideas from the ground up. They are the backbone of the economy.
They are also expensive. But becoming an entrepreneur needn’t mean decimating your savings or robbing a bank—in fact, there are four main strategies you can use to start a business on a budget:
1. Track everything
It is wise for anyone planning to start a business to keep track of expenses from the very beginning. A business owner should track every single expense, from the purchase of equipment, furnishings and supplies to advertising and other marketing expenses to services rendered by lawyers and design consultants—any business-related expense is important to note, no matter how small.
Keeping records allows a businessperson to track unnecessary expenses and do away with them. These records also act as evidence in case of a legal tussle. And if you save every receipt and keep them as record in a safe location, your deductions at tax time will be easy to calculate (and you won’t miss anything!).
Cloud technology has made this aspect of business easier than ever. For example, you can save considerably by subscribing to an online inventory management and order application that integrates with your accounting software, allowing you to track business expenses and payroll as well as orders and shipping, all from one software package. In fact, there are web-based business applications being developed that can easily integrate many of your business operations, from marketing to project management, under just one platform.
2. Hire contract professionals
Hiring contract professionals such as accountants is a good money-saving strategy for small businesses. These professionals can help you discover deductions that you may not have been aware of at first. They can also help you effectively track all your business expenses. And the value they add to your business comes at a reduced cost—you only hire a contractor for as long as it takes to get the job done, and you don’t need to pay their social security taxes or offer them benefits such as paid time off. Best of all, you don’t add to your payroll commitments.
3. Prioritize startup costs
Create a list of all items the business needs to start and operate effectively, including things like computer equipment, POS systems, office supplies, furniture and other business software. Come up with a budget that accounts for all the needed items, as well as for loans and grants received from friends or organizations. The budget should indicate the expenses that will be incurred when setting up the business.
If you need to depreciate some business startup expenses, it might be a good idea for you to delay making all purchases that aren’t urgent. These would include purchases that may not be necessary until the doors of your business are actually opened to the public. The purchases made after officially opening the business can be written off fully in the first year rather than having them depreciate over the course of several years.
4. Upfront deductions
Small business owners can write off a significant amount of their startup costs and organizational expenses in their first year of business. For example, an entrepreneur can write off up to $10,000 in business startup costs and organizational spending if either expense exceeds $50,000.
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