Today’s guest post was written by BCB reader, Kalen Smith. Kalen writes tips about financial management and consulting over at Engineer-a-Business.com
Some businesses can take weeks or months before they generate revenue. Bill collectors don’t wait for your business to take off. It is important that you manage your expenses carefully in the early months while you are building your client base. You also need to be careful after your business takes off, because economic problems and delinquent customers are a fact of life for every business.
First of all, you need to estimate your expenses and know how long you will be able to pay them yourself. Ideally, you will have saved up enough to cover both your personal and business expenses for several months before you go into consulting. In this economy, this isn’t always possible. Many professionals are forced into being freelancers after they have been laid off from their full-time jobs.
Keep Your Confidence in Check
Small business owners sometimes get overly confident about their abilities to save money in times of prosperity. It is easy for them to return to the mindset they were in when they were doing the same task for a fixed salary. They forget that they are on a feast or famine cycle.
Know Your Limit
This is why you should always review your budget. If you make 10% more than you expected one month, there will probably be another month when you are down by at least 10%. Don’t splurge excess earnings. Invest them in something that will provide a measurable return for your business. If possible, invest in something that is fairly liquid or provides an immediate return in case you end up in a bind later on.
Save Money with Technology
One of the best ways to save money is to be up to date on technologies that allow you to work more efficiently. The average monthly phone bill for a small business is about $75, but email and services like Skype are free. If you have to maintain a record on everything you do with your business, reduce your printing costs by keeping those records electronic whenever possible.
Play it Smart
Obviously, don’t be pennywise and pound-foolish. You need to justify spending money on new equipment. Try to take advantage of free and open source software, rather than spending several hundred dollars on an official version of a program that does essentially the same thing. Take advantage of discount programs on new software and equipment, but make sure you know what you are buying.
Becoming a freelancer in a recession isn’t impossible. For many unemployed professionals, it was the only way they could survive. In order to make it in this economy, you only need two things: faith in yourself and a disciplined strategy for saving money.