7 Ways Small Businesses Can Save Money in Their First Year
Jan 21, 2021
When researching the costs of starting a business, we realized that the financial realities of doing business don’t always match initial expectations. More specifically, small business owners reported spending more than twice as much in their first year than they had anticipated.
We needed to know: Where did their forecasts go wrong? Did they overspend in certain areas? And what could they have done to reduce costs?
Turns out, there were some financial missteps almost all founders reported making in their first year—and most of them were avoidable.
To help you avoid these same pitfalls, we interviewed successful Shopify store owners to find out what they would’ve done differently in their first year and what financial advice they’d give new entrepreneurs. We also pooled the top resources from our blog so you can dive deeper into each topic. If you’re starting your own business, you’ll want to keep this list handy.
Table of Contents
1. Don’t skip financial planning
The first step to hitting your financial goals is actually writing them down. This might sound obvious, but many first-time entrepreneurs find the process of writing a financial plan either too overwhelming or unnecessary in the early days, so they skip it altogether. If you’re tempted to do the same, think again.
Creating a financial plan forces you to take inventory of where you are right now, where you want to be, and how you want to get there. It also helps you make better decisions in a pinch, and forces you to remember the big picture when you’re feeling bogged down by the day-to-day of entrepreneurship.
“You have to figure out how much the company is going to need to survive for the first six months, the nitty gritty,” says Baxter Snider, Founder of Olives and Applesauce “What do you think your sales are going to be with that? What do you hope your sales are going to be? What’s going to happen if you don’t hit that? What happens if you go viral and you exceed that? You need a backup plan for both scenarios.”
What’s more, just the process of writing a financial plan can save you money.
Our research found that businesses who reported using financial plans and budget kept costs down and made more money in their first year.
- How to write a financial plan
- A detailed guide to writing a useful business plan
- Business plan template: A framework to streamline your next business plan
2. Grow your network
Generally speaking, the bigger your professional network, the better. Every person you meet could be a potential advisor, customer, or partner. And in the early days, it can actually help you cut costs significantly by turning your time and skills into currency. For example, Baxter Snider traded one of her products, a baby carrier, in exchange for free product photography in the early days.
Not to mention, the easiest way to accurately forecast how much money you’ll need to invest in your business is to talk to people who have started similar businesses, or who advise those businesses.
Some tips for building relationships with like-minded entrepreneurs and small business advisors:
- For starters, take charge of your personal Facebook, Instagram, and LinkedIn pages letting your network know of your new business venture, what help you might need, and what you’re offering in return. Join Facebook and LinkedIn groups that are relevant to your business or industry, as well as more general groups related to small businesses.
- SCORE’s mission is to support small business communities through mentoring and education. In the US, it has a huge network of volunteer, expert business mentors, and has helped more than 11 million entrepreneurs since 1964.
- SheEO is one of the strongest networks and communities for supporting women and non-binary founders.
- Backstage Capital is a community of investors, mentors, and entrepreneurs focused on supporting Black founders and underrepresented groups in entrepreneurship.
- Shopify’s Build Black is an ongoing conversation series that brings leading Black business minds together to discuss getting started and keys to success.
- The Fireweed Fellowship is an accelerator and hub empowering Indigenous entrepreneurs in Canada with courses, mentorship, professional coaching and much more.
- When the world opens back up, Meetup.com makes it easy to find local groups of entrepreneurs, whether they’re operating in your industry or talking through specific issues. Browse topics like “Small Biz” and “Small Business Owners” to find meetups near you.