It used to be that you mentioned a “home-based business” and people thought about little old ladies going door to door selling Tupperware. Today, the idea of what home-based businesses can be has expanded and the power of the internet, cloud computing and changing business cultures means almost any business can be managed from the comforts of home.
If you’re thinking about launching a home-based business, or are already running one, then you need to think carefully about the financial side of things. There’s a huge opportunity to shed costs and remain lean, which is often necessary when you’re just starting out. However, you have to be intentional about how you spend. Otherwise, you’ll get carried away and put your business at a disadvantage.
8 Ways You Can Cut Home Based Business Costs
In the early days especially, your business expenses are what will determine your profitability. You probably aren’t bringing in a ton of revenue just yet, so you have to be careful with how you spend your money and strategic in where you save.
Thankfully, there are a lot of opportunities for home-based business owners to rein in their spending. Here are a few ideas and suggestions:
1. Don’t Go Overboard With Your Home Office
A lot of people have this grand idea of creating a home office that looks like it belongs in Forbes magazine. While it’s nice to have a well-designed office, don’t go overboard. All you need is a spare bedroom with a desk, computer, printer, filing cabinet and a few other gadgets. You’ll have time down the road to spruce things up. For now, pouring a bunch of money into an office is a waste of resources.
2. Shop and Compare Home Service Providers
You should do this whether you rent an apartment or own a home and run your business out of it, but take a few minutes to shop and compare home service providers. A simple tool like InMyArea.com lets you plug in your zip code, research home service providers — including cable, internet, and home security — find prices, and compare based on your needs. You may be shocked to learn that the same service can cost as much as 10 to 20 percent more depending on the provider you go with. There’s no point in overspending.
3. Request an Energy Audit
Did you know that most energy companies offer free home energy audits? It’s in their best interest to help customers maximize efficiency, so you can call them to come out and examine all of your home’s systems, identify air leaks, and provide advice on how you can maximize efficiency. With the amount of time you’re going to be spending in your home, it only makes sense that you’d want to conserve energy and save on your power bill.
4. Take the Home Office Deduction
When it comes time to file your tax return, make sure you take the home office deduction. It’s not going to make you rich, but it will save you a bit of money.
There are two ways to file for a home office deduction. The key is to determine which one is best in your situation. There’s the simplified home office deduction, which allows you to deduct the square footage of your home office at $5 per square foot (up to $1,500). Then there’s the standard method, in which you actually track and calculate the direct and indirect home expenses that affect your home office — including bills, taxes, mortgage interest, etc. For the sake of simplicity, most people go with the simplified option.
5. Pool Your Purchasing Power
One of the downsides to running a small home business is that you don’t typically have the need for large quantities of supplies. This means you don’t qualify for wholesale discounts, which are necessary if you want to keep costs down.
One strategy is to pool your purchasing power with other small business owners you know in the area. By going in together, you can buy things like printer paper, ink and shipping supplies in bulk and then divide them among yourselves.
6. Brew a Pot of Coffee
Here’s a little tip for the coffee drinkers out there. When you worked outside of the home, you were probably a big Keurig person. Either that or you were a regular at Starbucks each morning on the way to the office. Unfortunately, both are expensive.
As you stay at home, you get to enjoy the benefit of brewing an entire pot (rather than doing one K-cup at a time). By one cost analysis, someone who drinks three cups of coffee per day can save $400 per year doing it the old-fashioned way. That’s not an insignificant amount by any means.
7. Hire Remote Freelancers
As you grow your business and need assistance managing the various parts of it, resist the temptation to hire employees. From a cost perspective, the cheapest and most efficient option is to hire remote freelancers. Not only does this eliminate the need to bring employees into your house, but it also prevents you from having to cover payroll taxes and other additional expenses that come with these formal relationships.
8. Talk With Your Auto Insurance Provider
If you’ve gone from driving to work every single day to working from home, chances are the annual mileage on your vehicle is much lower than it was. Did you know that most insurance providers offer low-mileage or usage-based discounts?
The definition of “low-mileage” varies by insurance provider, but the cap typically falls somewhere in the 7,500 to 15,000 range. Talk with your provider to see if there’s an opportunity for you to save some money on your premiums.
Keep Your Business Lean
Any business functions better when it’s strategic with expenditures, but home-based businesses have to be especially cognizant of spending. By keeping your business lean, particularly in the early years, you can save more money, maximize profits, and seize more opportunities when they’re presented to you.
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