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7 Important Considerations for Frugal Small Business Owners

Melissa Thompson

Starting a business is an increasingly accessible option for professionals everywhere. Thanks to the prevalence and availability of website builders, social media, and practically unlimited (and free) online resources, anyone with a business plan and sufficient drive can formally start a business and start generating revenue—all without much capital. In fact, depending on the type of business you want to create, it’s likely possible to start with less than $100.

That said, the early stages of your business’s development are going to be vulnerable. Most business owners attempt to mitigate this vulnerability by planning their approach as frugally as possible; spending less money means taking fewer risks, and giving your business more opportunities for profitability as it becomes stable.

Frugality certainly isn’t a bad strategy, but in some cases, it can work against you. If you plan to launch and run your business while spending as little money as possible, there are some important considerations to bear in mind.

Making a Frugal Strategy Work

These considerations and strategies will make it more likely that your frugal approach will help you become successful:

  1. Understand that you have to spend money to make money. There are many things you can go without in a business, but the cliché is true: you do have to spend money to make money. You’ll need marketing, advertising, and/or a sales strategy to raise awareness of your brand and attract more customers, and those strategies cost money. Your best bet is to focus on return on investment (ROI), rather than initial cost, so you get the greatest possible value from your contributions. Utilizing link building strategies, in combination with search engine optimization (SEO), is relatively inexpensive, but can offer strong returns over a period of months, or even years.

  2. Don’t skimp on the fundamentals. It’s possible to build a website for free, and have a buddy design a logo for you, but the core fundamentals for your business (including your branding and website) deserve a bigger investment. These assets are often going to form the first impressions of your prospective customers; don’t be afraid to spend extra money on the elements most likely to make or break your business.

  3. Delay hiring as long as possible. Business owners are often eager to hire employees as soon as possible, so they can start to expand. However, the costs of hiring and retaining an employee are higher than most people realize, so it’s in your best interest to delay hiring as long as you can. In the meantime, work with freelancers and independent contractors as needed.

  4. Don’t buy or lease property unless you have to. Having an office might make your business feel more official, but if it’s not strictly necessary, you should consider going fully remote. These days, it’s possible for many businesses to remain operational without a central location. Because real estate tends to be massively expensive, this could sharply reduce your operating expenses.

  5. Negotiate everything. Most things related to your business are negotiable, even if they don’t seem like it. The more active you are in negotiating contracts and deals, the better prices you’ll get for the products and services you need. For example, you might be able to negotiate a better deal on the lease for your building, or a better price for your business internet package. Polish your negotiation skills to make the most of this.

  6. Network and leverage your connections. Spend time networking with other people; over time, you’ll build up a vast network of connections who can help you cut costs in multiple different ways. You may meet fellow business owners who are willing and able to extend a discount for you, possibly in return for a favor. You may also get to hear pieces of advice and perspective, which allow you to run your business more efficiently.

  7. Expand gradually. Many new business owners are eager to expand as quickly as possible, investing in new locations or offering a wider range of products. However, it’s in your best interest to expand gradually. Excessively fast expansion is responsible for the demise of many businesses; as your company gets bigger, it becomes harder and harder to control (and understand) your costs, so it’s wise to keep things tight until you’re ready.

Closing the Gap

Even with a tight budget, you may find yourself in need of additional financing, without enough revenue to pay for it. If this happens, you must find a way to close the gap. In these cases, one of your best options is establishing a line of credit; this way, you can tap into your credit as needed, and pay back those funds when you gain access to them. As long as you’re making smart purchases, with a focus on ROI, you’ll eventually succeed.