Being an entrepreneur for the first time can be especially challenging, although things never really get very easy at any point. Nevertheless, an experienced entrepreneur will know to anticipate those challenges and be prepared to handle them even before they show up. When you are relatively new at building a company though, the following tips may prove to be quite beneficial.
Skipping Rent: Consider a Virtual Business Address
Virtual business addresses were a popular way to save money for small companies long before 2020, but it has become a much more viable, rounded, and acceptable setup after the pandemic. The question is, do you really need to spend so much on renting out a commercial space when the same work can be completed via a remote or virtual work environment?
If your answer is no, then that could be a huge financial relief for small companies both new and old. It will not be applicable to all business models of course, but for most online entrepreneurial ventures, skipping rent is a very real possibility. The company will still need a physical address to provide a professional contact info to clients and marketing content of course, and that is exactly what a virtual business address is for.
Pareto Principle: Identify Main Income Sources
If your company has been in business for even just a year, you can make use of the Pareto Principle. In a nutshell, the Pareto Principle or the 80/20 Rule states that 80% of outputs in a business are delivered by 20% of its inputs. This principle can be applied to multiple business processes and measured in different semantics. For example, if yearly revenue is to be the output, it is likely that roughly 80% of the total is being generated from 20% of the clients.
Keep in mind that the Pareto Principle is neither universal, nor is it a law. It is not meant to be taken quite literally as it isn’t supposed to be mathematically accurate all the time. Nevertheless, it does quite correctly point out the disparity we commonly see between input and output. The idea is to:
- List the clients, employees, processes, products, services, and every other active input.
- Create different semantics to rate each input on scales such as revenue, revenue: profit ratio, reliability, replaceability, etc.
- Create lists of importance for each semantic in descending order to identify the key inputs.
- Direct or redirect more resources to each key input so that their outputs can improve further.
- Shave off inputs from the bottom of each list if the output does not exceed the company’s input.
Freelancers and Temps: Keep the Permanent Payroll Small
When you work with freelancers, they only get paid for the work that they do, which eliminates the input: output problem discussed in the previous step altogether. Temps or temporary workers are hired on a short contract to handle extra workload on busy months, but they can just as easily be turned into permanent employees if needed. A combination of these three types of employees will always keep your employee expenses minimal.
Any company will need at least some core employees on the permanent payroll if they wish to grow beyond a certain point. As the business grows larger, the number of employees on their permanent payroll will also increase. However, small companies and especially new ones should keep that payroll as small as possible.
