7 Ways Your Small Business Can Spend Smarter
Ohen you run a small business with tight margins, every transaction counts. Inflation and labor shortages have made this year particularly difficult for companies already struggling due to the consequences of the pandemic. According to a 2022 Guidant Financial survey, 35% of small businesses said they were not profitable.
Hindsight is 20/20, and small business owners who have operated during the pandemic have come out the other side with money lessons for their peers. Here are three lessons from entrepreneurs on how to spend smarter and save where you can.
Franziska Trautmann, co-founder of New Orleans glass recycling company Glass Half Full, saved two months’ rent by offering to clean out the warehouse her company eventually moved into. In the space the business previously operated in, Trautmann saved three months’ rent by having this landlord sponsor his business. She says she was in a unique position to do so due to the pandemic – demand for commercial rentals was weaker than usual.
Along the same lines, don’t underestimate the power of pitching your business idea. People who are interested in it might be willing to help.
2. Consider spending more upfront to save money in the long run
Trautmann says having to buy so many recycling machines right away was a “hard pill to swallow,” but she regrets buying used equipment to save money in the short term. The time and money the company spent fixing used machines wasn’t worth it, she says. More recently, equipment repairs suspended business operations for three consecutive days.
3. Have an adaptable business strategy
April Okpo, co-founder of Tanjarine Kitchen in New Orleans, had to shift gears when fewer customers visited the company’s vegan food truck due to the pandemic. Instead of relying solely on individual sales, Tanjarine Kitchen has changed its business strategy and also began to focus on restoration opportunities.
In addition to staying afloat as around 90,000 restaurants were forced to close during the pandemic, the company has used the restaurant model to its advantage. Since he was serving large quantities of the same meals, Okpo reduced the menu and bought in bulk, which saved the company on food costs.
4. Let data drive production
Tanjarine Kitchen’s food truck sales are less predictable in nature than catering, so Okpo lets data from the company’s point-of-sale system do the talking.
“We were able to look at the models and see exactly how much we need, where we can cut back and how we can save,” she says.
Analytics can show you which menu item is most popular, how many sales you make per day, and what times of day are busiest, among other data points.
5. Take your time choosing software products
Tanjarine Kitchen has changed its point of sale system three years later, and Okpo likes that the current system is a monthly subscription instead of a multi-year contract. This way, she can save money by putting the service on hold when not in use.
Jamesha Lucas, co-founder of a former beauty store in Detroit called Bronzed N Glow Beauty Boutique, also switched point-of-sale systems at some point and stresses the importance of integrations, especially between commerce electronics and in-store sales.
“If I could sum it up, it comes down to slowing down, doing research, and making sure you have all your processes in place first,” she says.
6. Don’t quit your day job just yet
“There’s this awful mantra there that’s like ‘quit your job and start a business,'” Lucas says. “Do not do that.”
Instead, she suggests waiting for the new business to work out before quitting your old job. If she hadn’t kept working as she prepared to open Bronzed N Glow, she might not have been able to repay her loan when a street redevelopment project unexpectedly curtailed foot traffic to his store.
7. Limit renovations if you rent
After opening and then closing Bronzed N Glow, Lucas warns against costly renovations to a space that doesn’t belong to you. “Note: You shouldn’t put flooring in a building you rent out,” she says from experience.
Lucas adds that she would also have waited to make improvements to her tenants until the building owner had completed construction.
“Most business owners are visionaries, and so visionaries see the big picture,” she says. “They’re really excited and moving forward.” Looking back, Lucas realizes that it’s good to start small instead.
More from NerdWallet
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.