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Contractor in Charge | Ways to Reduce Your Startup’s Operating Expenses

Shared by Contractor In Charge.

When you’re starting a business, the experts at Contractor in Charge know it’s easy to get caught up in the excitement of ideas and innovation that are necessary to create your new venture. After all, your passion drives you to take the risks and invest time and money into something that could fail spectacularly. However, it can be challenging if you have not thought about the hidden costs and expenses that come with setting up a new business. Instead of creating cost-cutting strategies from the get-go, many entrepreneurs dive headfirst into their shiny new venture without considering how much it will cost to maintain on an ongoing basis. At Contractor in Charge, they know that even small businesses need to keep track of their operating expenses so they don’t spend more than they can afford from month to month.

 

But how do you know where your money is going?

 

Contractor In Charge

Image credit: Tima Miroshnichenko

 

Know your monthly costs before you dive in

If you don’t know how much money you’re going to have to spend each month on your new business, you could end up in serious debt. When it comes to operating expenses, there are two main categories to look out for: fixed costs and variable costs.

Fixed costs are expenses that you will have each month, such as your rent, utilities, and insurance for your business.

Variable costs are the expenses that come with your product or service, such as supplies, shipping, and marketing.

The bookkeeping experts at Contractor in Charge suggest keeping track of all these expenses as you go so that you know how much money you need to make each month just to break even. You can also use these numbers to create a budget for your first few months of operation, which will help you stay focused and on track.

 

Plan for the worst, not just the best

While you should definitely dream big for your new venture, you should also plan for the worst-case scenario when it comes to operating expenses.

For example, if you’re planning on renting office space, factor in the cost of moving your operation if you need to find a new location at the last minute. When it comes to hiring employees, factor in the cost of hiring the wrong person and having to go through the process of replacing that person.

Don’t let those unexpected costs derail your business before it gets started. Keep track of your monthly expenses and make adjustments if you go over budget.

 

Contractor In Charge

Image credit: Karolina Grabowska

 

Stay lean during these first few months

Even if you start your business with a healthy financial cushion, the pros at Contractor in Charge note that you’ll want to ensure you don’t spend all of it in your first couple of months. Be careful about how you spend your money, and make sure you are always cautious about what you buy, especially supplies and inventory.

Ask yourself how many times you need to use that item before you would break even on the cost of buying it. If the answer is “once” or “not at all,” you might be better off skimping on the expense and trying to do without.

 

Pay only for what you need upfront

You don’t need to buy everything that you need for your new business right away. Even if you can only pay for part of the cost upfront, this will help you to avoid ending up with a huge bill that you will have trouble paying off.

You may also be able to negotiate a discount when you purchase items or services on credit. If a vendor won’t reduce their price, consider shopping around for a better deal.

 

Hire wisely

You don’t want to hire people just for the sake of it. Instead, hire employees or contractors who can do the job that needs to get done and do it well. This will help to reduce the amount of money your business spends each month.

 

Bottom line

It’s tempting to spend all your money on your new business before you even open the doors, but this can come back to bite you later on. Instead, make sure that you have enough funds to last you through the first few months of operation so that you can keep your costs low. This will help you to avoid overwhelming yourself with expenses, which can lead to frustration and stress.

Keeping an eye on your operating expenses is a great way to keep your business running and growing.

 

Contractor In Charge

Image credit: Karolina Grabowska

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