Member Article

Balancing your business - Where to spend and save

The government recently announced plans to extend the Funding for Lending Scheme by a year, which is clearly very good news for entrepreneurs who need a cash injection in order to get their fledgling business off the ground.

Chancellor George Osborne said that now credit conditions for households and large corporations have improved, “it is right that we focus the scheme’s firepower on small businesses”, which he then went on to describe as the “lifeblood” of the UK’s economy. While this is encouraging, the odds are still stacked against ambitious people who want to make waves in the business world.

Setting up a company from scratch is no mean feat, and to stand a chance you really need to have a firm grip on your finances, ensuring that every penny you spend is accounted for.

Here are a few areas in which start-ups should be looking to spend and save.

Spend: Outsourcing certain tasks

Like a mother who has just given birth to her first child, it’s normal for a small business owner to feel overprotective of their enterprise.

While it’s good to adopt a cautious attitude, you simply must learn to trust people if you are to progress. As you start to grow, you need to make a sensible assessment as to which tasks you keep in-house and which ones you outsource to third-party experts. It’s certainly worth considering hiring a specialist in important areas where you lack expertise, especially if there are legal implications to consider. This is why more small firms bring experts in to take care of their health and safety, HR and tax obligations in particular.

Extra money spent on quality outsourcing can save you a fortune in the long run.

Save: Energy bills

Install motion-sensing lights, bring in smart meters and regulate the temperature of your building. The Carbon Trust suggests that a 20 per cent cut in energy costs is the equivalent of a five per cent increase in sales.

This just goes to show that your frugality is certainly not misplaced when it comes to energy consumption.

Spend: Bring in quality staff

According to Oracle, hiring and training a new employee can cost between 30 and 50 per cent of their salary. As such, you simply cannot afford to cheap out when it comes to recruitment.

You may be tempted to bring in a raw youngster who has the potential to grow, but remember that you’ll need to commit more of your own time to training them - precious time that would be better used elsewhere in your burgeoning business.

Investing in an employee who can come in and hit the ground running will ultimately save you money long term.

Save: Client expenses

There comes a point where you need to offer one or two sweeteners in order to land new clients. This is where you need to be clever and think of ways to make them feel valued without breaking the bank.

If your services are good enough, they should speak for themselves and you shouldn’t need to fork out for an executive box at the Champions League final in order to persuade the prospective client to choose you over other businesses. Take them out for the odd meal by all means, but you can earn their trust by being transparent and maintaining regular contact. Bribery can be expensive!

Spend: Get a flexible deal on your business premises

You might have found an office that is perfect for your business, and best of all, it’s an absolute steal.

The only drawback is that you have to sign up for a minimum three-year lease, but it’s worth it, right? Not necessarily. While the property might be big enough to accommodate your staff now, will it still be fit for purpose 18 months down the line?

All small businesses need to be realistic about their expansion plans, so you should always think about your potential growth trajectory before committing to a big decision. It’s worth paying more money per month in order to secure a lease that works on a rolling basis from month to month. Although you’re paying more, you’ll have the flexibility to upsize should you have a sudden growth spurt.

This was posted in Bdaily's Members' News section by Quantic UK .