Join our mailing list to find out more ways to make and save money with little time and effort.

How To Save Money In Your New Business

Some of these links may be affiliate links and we may receive compensation when you sign-up for offers. See our disclosure policy. All information on this site is for educational and informational purposes only.

Time magazine reports that cash flow problems kill a quarter of all new businesses. One way to prevent that is to start a business on a shoestring budget to preserve some of your cash.

To do that, see my articles on businesses you can start for under $200 and businesses you can start for under $100.

Another common solution is to line up credit before you need it. It’s a great idea but debt shows up on the list of the three “Ds” that can kill a business (the others are death and divorce). So be sure you use that borrowed money wisely.

Using credit cards to resolve cash flow problems is suggested by some. Of course this also a form of debt, and a potentially expensive one.

The best approach to avoiding cash flow problems might be to spend less for all of your business expenses.

Cash flow has to do with money coming and going, and if there isn’t much going out, you can more easily handle the ups and downs of the money coming in, right?

So with that goal in mind, here are some ways to save money on just about everything when starting and running your small business, starting with….

Overhead Expenses

There is an important difference between overhead and operating expenses. Unlike most operating expenses, overhead doesn’t drop when sales are slow or non-existent. That’s why it’s so important to keep your overhead as low as you can. Here are some tips for doing just that.

Rent – You can find plenty of tips online on how to find cheap office space. But the cheapest solution is to just work from home. This is possible with most small businesses, and you can always upgrade later, when you have more money coming in.

Utilities – This is another expense easily eliminated by working from home. If you do have a separate business location, try replacing energy-wasting light bulbs with LED lights, installing a smart thermostat, adjusting the toilet float, and turning off everything when you leave for the day.

Insurance – If you have little to lose, and/or a business that isn’t likely to get sued (like selling books online), you can probably go without liability insurance. You can always change your mind later, when you have more liability and/or more cash flow.

Licensing and Related Fees – If you don’t need a license (check local laws), skip it at first. You can also wait to form an LLC or corporation until you really need the liability protection.

Phone – When you first start, there may not be many phone calls involved, so pass on the expensive commitments and buy a cheap pay-by-the-minute phone. You can just use your personal phone for some businesses (I have about one business call per year for my freelance writing business).

Internet Service – As long as you can document that you use it for your business, your internet service is a deductible expense at tax time, so why pay more for a “business plan?” Just get the cheapest decent personal internet service.

Operating Expenses

Most operating expenses drop when sales are slow, but they still matter when it comes to cash flow. Here are some ways to keep them to a minimum.

Wages – The obvious way to keep it cheap here is to have no employees. If you need only a little help, consider using workers from a temporary agency to save the expense of setting up payroll, buying workman’s comp insurance, etc.

Interest – Avoid debt and you’ll have no interest expense. But if you must borrow, try to stay away from using high-interest credit cards or business loans. See if a family member can loan you the money, or take out a little extra when you refinance your home.

Office Supplies – If you already have pens and paper you might have what you need for now. Beyond that, wait until you really need something before buying it. Thrift stores are good for cheap office furniture.

Cleaning and Maintenance – To the extent possible, do it yourself. If you need equipment repairs, find qualified acquaintances with whom you can barter (assuming you can provide some goods or service they can use).

Travel – Avoid unnecessary travel, but if you must, be sure to make it deductible in order to save on taxes (see tax savings section below).

Accounting – If you business is simple, do the accounting yourself. For example, my freelance writing business requires a pen, a calculator, and a few sheets of paper annually. You can always hire an accountant when things get more complicated, or find a friend with accounting experience with whom you can barter services.

Tax Return Preparation – Again, if your business is simple enough, do the tax return yourself. Alternately, use software on your computer or online. In my experience, many automated online tax preparation services are more sophisticated than human tax preparers — and much cheaper (and I’ve used several of both types).

Marketing Expenses

There is a difference between marketing and advertising. Basically, the latter is just one part of the former. We start with marketing. Here are a few tips for keeping the cost as close to zero as possible.

Website – You might be able to get by using just your email address in marketing materials, but most businesses should have a website. Free options are available, but the lack of control and professionalism is a problem.

Fortunately, a domain name can be had for around $10 per year, and hosting a site costs as little as $4 per month at places like Bluehost. Use any free tools provided to build the site or get a friend to help. You may not need more than two pages, at least to start.

Business Cards – If you’re careful to avoid add-on costs you can get 500 business cards for as little as $10 from places like Vistaprint. You might do better than that if you have a printer and some heavy paper (card stock ideally), and use a free online card design service.

Logos and Designs -Believe it or not, you can get some decent logos and other design work done starting at just $5 on (I once had some great book covers made for $15 each there).You can also put off any design expenses until you have more income.

Advertising Expenses

Depending on the nature of your business you can probably skip paid advertising at first. Use word-of-mouth advertising, and then consider trying some of the following frugal business strategies.

Radio Advertising – Many radio stations offer cheap advertising (some as cheap as $3 per spot, according to, especially if you’re able to create the ad yourself (the design part can get pricey). Also, locally-owned stations have the ability to barter for your business services. For example, I know a carpet cleaner who trades cleaning for advertising.

Craigslist Advertising – Ads on Craigslist, including for businesses, are free, with only a few exceptions. Just remember to keep reposting your ads, or they’ll be quickly pushed out of sight be new ads.

Bulletin Boards – Most communities have free bulletin boards in various locations (libraries, coffee shops, some other businesses). You can generally put up a small ad or at least a business card without any problem.

Articles – If you have a business, you’re an expert, and you can share that expertise as a way to generate business. For example, if you’re a pool cleaner you might write an article on how to know if a pool is safe, and offer it for free to small local papers. If you’re not much of a writer, get a friend to help (in exchange for cleaning her pool?)

Inventory-Related Expenses

Inventory is not technically an expense, but how much of it you keep on hand, how much you pay for it, and all of the associated costs (storage, delivery) do affect cash flow. Here are some tips for keeping these costs to a minimum.

Sell Before You Buy – Depending on the nature of your business, you may be able to sell your products before you buy them. For example, if you can get your products within three days and you promise delivery in a week tot ten days, you may not need to keep anything in stock. Just sell, order, and deliver.

Use Your Home as Long as Possible – Why pay for storage for products if you have a garage, basement or shed where you can put them. Until you really need more space, use what you have to save on storage costs. You might also consider adding a cheap shed to the yard as a cheaper alternative to paying monthly for storage.

Try Dropshipping – Instead of having a house full of inventory, which ties up space and money, consider selling things that can be drop shipped. When orders come in you forward them to your suppliers with your wholesale payment and they ship the products directly. One look at a list of drop shipping companies shows just how many different products can be sold this way.

Start a Service Business – If you have a service business, you may need equipment, but you have no product inventory eating up your cash flow.


Reduce the taxes you owe as much as possible in your first year, because the second year quarterly estimated taxes you pay will be based on what you owe in year one.

That means future cash flow will be, in part, determined by how effectively you use every deduction you can, including the following examples.

Home Office DeductionThe IRS says you can deduct for the expense of using part of your home for business — even if you’re renting — as long as the part claimed is used just for business. The simplified option no longer requires you to divide up all your household bills to compute the deduction. Just multiply the area used (maximum 300 square feet) by $5 per square foot.

TravelThe IRS says, “For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.” That means you can deduct hotel costs, plane tickets, etc. When you use your car you can deduct for mileage (53.5 cents-per-mile at the moment — document travel with a simple logbook), but there’s a catch: Mileage from home to the first business location is not deductible. So try to have the first client or business-related stop as close to home as possible, in order to make all the rest of those miles deductible.

Meals and Entertainment – If you try to sell your product or service to a friend when you treat him to dinner, that makes it a deductible businesses expense, according to the IRS. Expenses of entertaining clients are deductible too. Meals for yourself are deductible if you’re traveling overnight on business. However, all of these are only 50% deductible, so don’t go crazy thinking you’re getting some great tax benefit by eating out.

Books and Training Materials – If books or other research materials are useful to your business, they’re legitimate business expenses.

Health Insurance – If you’re in business and are paying for your own health insurance, be sure to take a deduction for the cost. The IRS makes it clear that you don’t have to be incorporated or have a particular business structure. Any self-employed person is potentially eligible for this deduction.

Startup Costs – The costs of organizing and starting your business are capital expenses, meaning you would normally amortize them over a long period, getting only a partial deduction each year. “However,” says the IRS, “you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs…”

If you have a few of your own tricks for saving money when starting a business, please share them with us below… and keep on frugaling!

Earn Free Cash Online: The Survey Junkie survey site is a FREE survey site that pays you to take surveys online. There's absolutely no cost to join, and payouts can be made to either PayPal or for a gift card of your choosing. The best part? Some people are earning at a rate of up to $15 - $20 per hour. It's 100% free to join. We've partnered with Survey Junkie to give you a 25-point sign-up bonus when you register using our link and complete your initial profile information.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Secured By miniOrange