You could run a business on a P50,000 capital. You might even use a smaller amount if you don’t need too many people to operate. But that’s in theory. In reality, however, it takes a lot of money to run a company. With today’s inflation rate and the cost of goods in a seemingly unstoppable upward trend, you might even need to spend more.
And when you spend more, you might see your bottom line get smaller and smaller. But you can stop bleeding money by applying several money-saving techniques.
When You’re Starting Out
Before choosing the business, come up with a cost comparison. Would a car wash business, for example, be more manageable than an Internet cafe? It’s true that the best enterprise is the one you’re passionate about, but you need to weigh the benefits against the disadvantages in the long-term. Consider what is feasible to do now, then make an informed decision about your startup.
One of the best ways to save money from the get-go is to run your business from home. You spend less on overhead without paying for a lease.
Here are other ways for you to pinch a few pesos:
Look into used/refurbished equipment
Used equipment, from laptops to fax machines, can still do what you need them to do for a fraction of the cost. Make sure to source your machines and tools from reliable sources.
Find free applications for certain tasks
You’ll find many software companies offering free versions of applications that allow you to run your business cost-efficiently. For example, Freshsales offers free customer relationship management (CRM), which organizes your scheduled follow-ups and contacts.
Crowdsource your funding
Crowdfunding is a legitimate way to obtain money for your business. Crowdsourcing platforms work on donations and lending. Those who give money can choose from reward-based and equity-based models. And this option for getting a business off the drawing board to reality is gaining ground. A report from Rappler shares that investments for crowdfunding in Asia could swell to $92 billion by 2025.
Here are some options to consider:
- For creative enterprises, look into The Spark Project, which is a local platform
- For farms and agricultural projects, try Cropital and FarmOn
- For asset-backed businesses and income-generating real estate, there is UpBuilds
Get help from friends
You might not have enough funds to get people. Whether you need a website or advertising materials, you may have to do them on your own. Alternatively, ask friends if they’re willing to pitch in.
Try shared offices
An alternative to using your home as a place of business is renting a shared office space. Rentals can come in daily, weekly, and monthly rates. You spend less on overhead, but you’ll still be able to provide a professional image for your company. Shared offices will also offer administrative services with their rates.
When You’re Established
A recent report in Rappler states that the inflation rate rose to 6.2 percent in the third quarter of 2018.
Even with the tax relief brought about by the Tax Reform for Acceleration and Inclusion (TRAIN) Act, many businesses are still struggling to meet their bottom line. Net profits for Universal Robina, a food and beverage unit of JG Summit Holdings, fell by 23.1 percent to P4.8 billion and Cebu Air dipped by 23.6 percent to P3.3 billion.
As a result, companies are finding ways to manage and take control of their profit margins, with some raising prices, like Jollibee Foods. But the aside from the skyrocketing inflation, businesses also have to deal with depreciating peso, more input costs, and more competition.
You have other options than raising your prices.
Hire freelance professionals
Training and employee salary packages will mean bigger overhead cost. There are, however, certain areas about your business that would need professional help, from sales to tax accounting. A business owner wears many hats, but if you can’t fulfill certain jobs, then you need to get outside help. And freelancers could save you money.
Your options include:
- Hiring temporary staff
- Outsourcing a process to a specialized firm (e.g., administrative tasks, bookkeeping, IT, etc.)
Renegotiate contracts with suppliers
The year is coming to a close, so you may want to re-evaluate your contracts with suppliers. Are there vendors who may not be living up to their end of the deal? Is there wiggle room in your contract to renegotiate the terms?
See if you can get discounts or defer payments.
Explore tax policies to reduce your payments
Did you know that if your total assets do not exceed P3 million, you can apply as a Barangay Micro Business Enterprise and receive a100 percent income tax exemption? You could also be eligible for exemption from minimum wage. Depending on where your business is, you could also pay lower local taxes.
With the right guidance, you can make tax laws work for your business.
Pay your high-interest debt
Spending cash seems counterintuitive to saving money for your business. But a debt that balloons over time will defeat any money-saving effort you’ve implemented.
High-interest debt needs to take priority when you’re making payments. The sooner you get that debt off your list of concerns, the sooner you can build up profits again. Whether you’re paying off credit cards or equipment, make more than the minimum payments.
Learn to barter
When your purchasing power has significantly been reduced, you can turn to bartering. Yes, the exchange of goods and services without money changing hands is still a viable way to do business. There are organizations in the Philippines that facilitate these transactions, like Citibarter Philippines and Philippine Barter Association.
Evaluate your operating expenses
What is your business spending too much on? What can you do without and which can you cut further? Daily expenses can quickly add up, and they can become a big cost. It could be the supplies you get for the office, or it could be the cost of meeting clients outside the office. When you know which costs are taking a chunk out of your budget, you’ll be in a better position to decide which to cut or do without.
For example, if your client meetings are becoming expensive, you could try virtual meetings instead. You can reserve the face-to-face conference for critical concerns.
A soaring inflation rate. Depreciating peso. The rising cost of goods. It’s not an easy time to run a business, and bigger, established companies are implementing strategies to protect profit margins. Whether you’re just about to become an entrepreneur or are running a small business, you can get through this challenging time in commerce. Take stock of your situation. Create a realistic plan. And save money for your business.