What do Amazon, Disney, and Google have in common? They all began in garages. It’s, therefore, not surprising that you’re thinking of following their footsteps.
Like any business, though, you will need a good amount of working capital even if it means you’re just working at home. How do you lower your operation costs without hampering the quality of your service or product?
Here are x ideas:
1. Think Secondhand
No, you don’t need every supply and equipment to be brand-new, especially if you don’t know if they’re truly essential for your business or you’re still growing. Instead, pick used ones, such as secondhand pallet-racking systems.
Pallets help keep your workspace safe and organized. They also save you the hassle of trying to manage your physical inventory. However, they can be costly since most are built for commercial or industrial purposes.
By opting for a used pallet, you can cut the cost by at least 10%. Since these are usually versatile pieces, it’s easy for you to scale – that is, add more as your orders increase.
2. Lower Your Tax Bill
Running your business in the garage doesn’t exempt you from paying taxes, but you can maximize your claim so that you end up paying less to the government.
The tax rules in New Zealand are generally not different from the rest of the world. For example, you can reduce your business income with business-related expenses, such as rent, utilities, uniforms, entertainment, and vehicles.
You need to identify the ideal percentage that separates company and personal expenses. Take, for instance, your vehicle expense. You can claim up to 70% of the costs for tax reasons if you use your car mainly for delivering goods, picking up supplies, etc.
For supplies and equipment, you can claim the entire cost as capital expenses as long as it doesn’t exceed $500. Otherwise, you have to depreciate them.
Either way, always back up these tax expenses with receipts and other related documents. Also, keep them for at least seven years.
3. Reduce Labor Costs
A significant business expense is labor. In countries with job shortages like New Zealand, it can become more expensive and difficult to find.
The good news is there are many ways to reduce it:
- Get help from family members and friends. They can assist you in packing, researching, or delivering goods. You can pay them every time they provide their services. If they’re considerate, they might even help you for free.
- Look for business partners. As your business grows, you need more hands to help. You can explore partnerships and joint ventures at this time. This way, you can tap on other people’s resources, such as employees. Otherwise, you have someone to share labor costs or responsibilities.
- Hire temp workers. Opting for temporary staffing is great during peak seasons, such as the holidays, so you can take advantage of the surge in demand.
- Pay a retainer’s fee. Some jobs need specialized skills, such as taxation, accounting, and legal. To save money, consider paying a retainer’s fee instead. You’ll spend way less than having these people in-house.
The ultimate goal is to get out of the garage like the others did. But while you’re there, learn how to manage your capital wisely, starting with these three things.