Growing a small business on a budget is like the chicken-and-egg scenario; which comes first?
For most small business owners, it’s our budget because if we blow it, someone’s not getting paid.
But business growth takes investment, so what’s the solution?
One is outside cash, like small business loans, credit cards, or angel investors.
And those are great if you can get them, but what if you can’t?
Another way to grow your small business on a budget is to use low-cost strategies that maximize your resources.
Some are obvious, others a little surprising, but all will help you grow your small business.
The first strategy is one many aspiring entrepreneurs miss, and it’s the main reason most fail:
1. Validate your idea with a low-risk test
Before going all-in, you must validate your business idea to ensure it fulfills a market demand at the right price.
Already selling a successful product or service? You can skip this step.
But if you’re not, check out this statistic:
“42% of small businesses fail because of a lack of demand.” – Source: Fundera
You avoid becoming a statistic by using free research strategies and investing in a test campaign. It’ll cost a few hundred bucks, but your investment could be priceless!
Now, you might be a brick-and-mortar business owner and think, “Why do I need to validate my idea online”?
“76% of consumers search for a company’s online presence before visiting a physical location” – Source: Visual Objects.
These stats tell us that every business needs an online presence, and these strategies will help you confirm the demand, both on and offline.
- Trends.Google.com: Google Trends tells you if your marketplace is growing or declining by showing how often people search for your chosen business idea in specific locations. Once you confirm your business idea is trending upward, we dig deeper.
- Google Keyword Planner: GKP is a free Google Ads tool that enables you to research how your target audience searches for Google to identify the most effective keywords relative to your business idea and create a budget for your Google AdWords campaign.
Now you test your idea:
- Google Ads: Now, you validate the market interest in your idea with a Google Ads campaign and a simple website. Your site is your virtual shop window, and the Ads campaign directs people to it. The goal is to test the market demand and see if your website gets enough visitors to make it worth your investment.
How to create a free test website:
You didn’t think you’d have to pay, did you?
Create a product or service prototype:
Once you have your website and Google Ads campaign, you need a product or service prototype for your target audience to test.
- For products, contact manufacturers who will send you something similar or create one specific to your needs. Prototype cost depends on your product and whether manufacturers must create it from scratch.
- For services, provide a scaled-back test service your prospective clients can try.
Once your test is active, monitor the response and conversion rates to assess the level of customer engagement and demand.
Okay, that’s a lot, but the best way to save money is not to waste it.
Now for those budget-saving tips, you can use today:
2. Cut your costs
Can you think of anything you could cut and still maintain quality?
Let me give you an example:
My brother had a hardwood flooring business in Gloucester, Main.
He needed the best tools to maintain the highest quality, so he used Festools. But he also splurged on a $2500 Mac desktop his tech guy told him he couldn’t do without.
That Mac screen soon became a posted-note reminder notice board!
The best way to grow your small business on a budget is to cut what you don’t need to run it, and to make this work; you must be brutal.
- Begin by auditing yourself to see where you waste money on unnecessary expenditures your business doesn’t need. Do you need the latest iPhone or a Dunkin every morning to run your business?!!!
- Can you negotiate better rates with suppliers or automate tasks you’re paying someone to do?
- Look at your monthly overheads. Are there any outgoings you could reduce or remove?
For example: Do you lease a 20-foot container to store stuff you could do without? Or use a Ram 3500 6.7 liters to tow a lawn mower.
You get the idea.
What sacrifices could you make if Mark Zuckerberg can get by driving a $15.000 Honda Fit?
Next, let’s look at ways to reduce your business running costs.
3. Realistic ways to reduce your overheads
We no longer need office space to run a business, storage space to stock our products, or staff to have employees.
And cheap monthly prescriptions soon add up to a hefty bill that most small business owners can reduce.
My point is there are ways to reduce our monthly expenditures, and I bet you could use some of the following to cut yours:
- Could you downsize to a smaller space or trad-in your physical store for a pop-up shop?
- What about shared or coworking workspaces to reduce your overhead costs?
- Or cost-effective software like G Suite or Canva instead of investing in expensive suites.
- Do you use affordable inventory management tools like odoo or Zoho Inventory to streamline operations?
- What about embracing remote work to remove office expenses?
They could all add up. When you look after the dimes, the dollars look after themselves!
Speaking of which:
4. Pay yourself as little as possible
Many startup owners only take a wage once their business reaches its break-even point (when profits equal expenditures).
That’s why many of us start a side hustle; we need our day job income to survive!
But even when profits flow, keeping your income at a minimum is crucial because every dollar you take could improve your business with better product design, new equipment, professional branding, and targeted advertising campaigns.
The quickest way to grow your business on a budget is to set a minimum salary that covers your costs and then reinvest profits into your business.
- LLC and limited partnership members benefit from a lower wage, as any money you reinvest is a tax-free business expense.
- S corporation shareholders can draw an appropriate industry wage and take extra tax-free dividends, lowering their tax liability.
- However, sole proprietors are out of luck as they pay tax on all business profits, regardless if you take them as a wage.
Next, we’ll look at some employee budget-saving strategies that save you the cost of payroll taxes and employee insurance.
5. Hire employees without the usual expenses
Hiring employees is expensive and even a little risky!
The SBA tells us that an employee’s cost is, on average, 1.33 times their salary. So, for every $100 in wages, you must pay $133 to cover things like:
- Federal and state unemployment taxes.
- Payroll taxes (medicare and social insurance).
- Workers’ compensation insurance.
And you must pay the Federal and state minimum wage (usually more) to attract the right talent for your small business.
You can avoid those expenses using the following alternatives to full-time employees:
- Outsource using freelancers for all your branding and marketing needs.
- Hire consultants for legal and financial operations (lawyers and accountants).
- Employee contractors on a project-to-project basis.
- Hire seasonal or temporary workers for short-term projects.
- Hire part-timers willing to work during your peak periods.
But what if you need to hire full-time?
Offer flexible work arrangements or remote work options to individuals prioritizing a work-life balance over earning top dollar.
6. Consider paying talent with equity
Here’s a common scenario:
We want to grow our small businesses and need skilled individuals who bring value and expertise, but we can’t afford to hire them!
And here’s another problem:
When we hire someone for a lower wage, we get what we pay for!
So, how do we employ skilled people with a burning desire to see our businesses succeed?
You give them an equity incentive.
Now, I hear some of you saying, “Over my dead body, am I giving some of my business away.”
- But a part percentage of something is more valuable than 100% of nothing; you get me?
And if you want someone to work as hard and make equal sacrifices as you, you must give to get.
Here’s how equity works.
Equity compensation is offering a percentage ownership in your business as part of your employee’s wage.
There are two common types of equity compensation:
- Employee buy-in: Here’s where a new employee purchases company stock at its market value, either upon hiring or over time.
- Profit interest units: With this approach, employees receive a share of the profits, making no initial contributions.
By offering equity, you’ll incentivize your employees and make your success their success, and that’s something they’ll work for.
And consult with a legal professional to ensure you structure equity agreements properly.
The following strategy allows you to keep 100% of your business and piggyback off the success of others:
7. Grow your business without spending money using brand collaborations
Brand collaboration is when you team up with other complementary companies and combine your knowledge and marketing efforts to reach new customers without paying for extra advertising campaigns.
A complementary business refers to one that operates within the same marketplace but does not directly compete.
- For example, a wedding organizer could collaborate with a beauty salon to target an audience needing their services. Here, the event organizer would promote the salon to their clients and vice versa.
This collaboration creates a win-win situation, as both businesses thrive by supporting each other.
How to find collaboration partners
You’ve many ways to find partners, and all are free:
- Find local business communities hosting regular gatherings through platforms like MeetUp.
- Research local business listings like Google My Business.
- Contact your local council for information on future business events.
- Join local business associations.
- Research social media groups on Facebook to find collaboration opportunities within your community.
- Join LinkedIn to expand your professional network and connect with other local businesses.
8. Use low-cost marketing strategies to grow your small business
Low-cost marketing strategies help you promote your business without blowing your budget.
Enabling you to focus your funds on growing your small business while getting your brand seen and generating sales leads.
Create a free Google My Business account:
For local businesses, having a Google Business Profile is a fantastic free marketing strategy that displays your business on Google Maps, the local section of Google Search, and the Knowledge Panel on the right side for branded searches.
To ensure your Business Profile ranks high on Google Maps and local results, you must optimize it by verifying ownership of your profile through your Google My Business account.
It’s a simple process that helps you make the most of your Business Profile and reach more potential customers in your local area.
Post (and engage) on social media:
Growing your small business and connecting with your audience through social media is another fantastic, cost-effective approach.
It lets you showcase your brand’s personality, establish trust, and build an online community.
Maximize this opportunity by creating business accounts and participating in popular social media platforms like Facebook, Instagram, LinkedIn, Twitter, and YouTube.
Here are some actions you can take:
- Share your blog posts to drive traffic to your website.
- Engage with your followers to convey your brand’s voice and encourage more interaction.
- Conduct polls and request feedback to gather valuable insights.
- Create concise, easy-to-understand, and implement posts by stealing the best bits from your competitors.
You must consistently engage your users to foster a sense of community and show your commitment.
Remember, even a few spare minutes can make all the difference for social media engagement.
Expand your reach through social media by leveraging hashtags in your posts across platforms like Instagram, Twitter, TikTok, Facebook, and LinkedIn.
Here’s how you can use hashtags:
- Use broad or trending hashtags to reinforce your brand identity.
- Include more specific hashtags, similar to long-tail keywords, when offering resources or advice.
- Incorporate location-based hashtags for local businesses.
- Create custom hashtags to enhance your brand presence further.
Using a mix of hashtag types in your posts ensures they reach the intended audience and maximize their impact.
Guest post on a blog or podcast:
Anyone with skills other people want and experience worth sharing can provide value to their target audience and increase their brand awareness by guesting on an established blog or podcast.
It’s an excellent way to show your target audience your skills, passion, and expertise while driving traffic to your website. And reach a far wider audience and attract new customers or clients to your business.
Do some local SEO:
Google’s algorithm prioritizes accurate, high-quality, relevant content for search queries. The best part is that it’s not a pay-to-play system; it allows you to compete with larger competitors for prime real estate on page one of the search results.
Local SEO is a free strategy, and even though it requires time and effort, the long-term benefits can be significant.
Here are some essential local SEO tasks:
- Incorporate location-based keywords (e.g., “Your business name and location”) into your main website pages’ titles, headings, and content.
- Ensure consistent and accurate business listings across online directories.
- Create web pages or blog posts that cater to specific neighborhoods or areas you serve.
These local SEO practices can improve your online visibility and increase your chances of appearing when people search for a business like yours.
9. Use customer reviews and referrals to grow your small business for free
Getting customer reviews and referrals is a great way to grow your customer base. A survey conducted by BrightLocal in 2019 revealed that:
“82% of consumers read online reviews for local businesses.”
Even more impressive:
“91% of consumers admitted positive reviews make them more inclined to choose a particular business.”
It all comes down to the power of “know, like, and trust.” When someone who likes and trusts your business recommends you to a friend, they`ll feel confident about giving you a shot. It’s like a stamp of approval.
Get those valuable reviews and referrals by contacting your customers, telling them how much you appreciate their business, and asking them to share their experience by writing an online review.
And you can offer future discounts on your products or services to sweeten the deal.
But here’s a crucial point: pay attention to the feedback you receive.
“71% of consumers in the survey said they are likelier to choose a business that replies to their reviews.”
Show appreciation for your customers’ comments and handle any negative feedback with respect. After all, products and services sometimes go wrong, and most people accept that. But poor customer service is unforgivable!
Now you know how to grow your small business on a budget.
Your next step is to choose your first low-cost strategy, implement it, then rinse and repeat.
And if one saves you money, imagine what they could all do to your bottom line!
And remember, every dollar you save paying for unnecessary expenditures and overpriced services is one you can invest in growing your business.
Speaking of which, have you ever considered hiring an office manager to help grow your business?