Do you have a business, small, micro or large? Or are you thinking of going into business? Here are some of my Joyful Frugalista tips on why – and how – frugality matters.
- Save up first. As I wrote in a recent article for Money Magazine, nearly all my post-work contingency plans went out the window during 2020. Talk about burning the lifeboats! There was literally no retreat. Thankfully, I saved up first and had a good emergency fund. You never know what will happen with a new business – and it often takes longer to set up than you think – so save up your pennies first.
- Learn through a side hustle. Where possible, start your business idea on a small scale through a side hustle. This will enable you to test your ideas and see if you really like what you plan to do. If your job allows, you can also slowly lean into reducing your full-time hours and making your side hustle the real hustle. Of course, it’s busy in any business start-up phase and especially busy when you are doing TWO jobs. Self-care and prioritising your mental health comes first – take on what feels right for you and cut yourself a bit of slack. (Yes, I know from experience that this is easier to say than do. But if you want to go into business to have more flexibility, it’s important that you honour your intention by taking time off when you need it.)
- Don’t let being an entrepreneur go to your head. A successful entrepreneur once told me that he refused to be described as an entrepreneur and he hated the term. Huh? His concern was that people get caught in the glamour and excitement of describing themselves as an ‘entrepreneur’ – or a business owner. He’s seen people do crazy things like buying expensive new luxury cars and over-capitalise their business. Don’t let it all go to your head and concentrate instead on working to grow your business rather than looking flash. (By the way, that red Ferrari isn’t mine – I just wanted to take a picture with it.)
- Monitor your cash flow. This seems obvious, but so many people just leave their finances until tax time. You need to know about the money coming in – and out. Some businesses are more prone to cash flow problems than others. My mother was/is a fashion designer, and when she ran a wholesale business there would be months in between purchasing fabric and stock, making them, paying wages, paying to deliver them and then, hopefully being paid (within 30 days of delivery if she was lucky). As a freelance writer, it is not uncommon for me to be paid between two and six weeks after I write an article (and sometimes to have to hassle to get paid). It’s only by monitoring and tracking my cash flow that I know what’s coming in.
- All the little bits add up. You might think this is obvious, but just like with your own finances, the little bits add up. Don’t just think “oh, it’s a business expense that I can write off so it’s only a little thing.” Look at everything you do and see where you can reduce costs: subscriptions, energy usage, printing, staffing – whatever. In my case working in digital, I have a lot of subscriptions that can easily get out of hand, i.e. I need to really monitor the trial period and make sure I really need something before committing to it long term. OK, so maybe I did splurge on a few The Joyful Business Club/The Joyful Frugalista specialty mugs, which I use on my FB Lives and Zoom calls. But it was soooo tempting to buy all sorts of extra paraphernalia like pens and notepads and tote bags.
- Keep all receipts and have a good bill-paying system. Keep all receipts related to your business – even if you’re not sure you can claim them. A good accountant can tell you what you can claim at tax time, or else check the allowable expenses at the Australian Tax Office website. I subscribe to emails and follow the ATO on Facebook, which gives me access to alerts and news. It’s especially useful to know, for instance, what they plan to crack down on in a particular year. This is not to suggest anyone, ever, be fraudulent in regards to their personal or business tax, but often the ATO will say ‘this year we are putting extra resources into monitoring abc and common mistakes for claims for items that are not allowable are xyz‘. If you know this, you can make sure you don’t make that mistake and ensure you put extra attention into getting your tax claim right. I also have a place where I put all my bills and receipts, aka my wealth folder. In addition to the paper-based system, I also have a folder on my Gmail and a folder in my computer where I put all recipes and bills.
- Invest in accounting software that is right for your business. For years, I used an excel spreadsheet to issue invoices. I didn’t issue invoices very often, so this method worked fine for me. A big advantage was that I already had excel, so it was effectively free. Now that I’m doing more work, I’ve moved to an online accounting program. I use Saasu, which I find to be cost-effective. Many people like Xero as it is easy for non-accountants to use. I’m still learning online bookkeeping. Make sure you employ someone to help you if accounting isn’t your thing.
- Apply for grants. An excellent way to expand your business is to apply for grants. Who doesn’t like free money? The catch is that there is rarely anything for free. Often you need to provide matched funding and – especially if the grantor is a Government organisation – you need to account for how every single dollar was spent. Often the funds need to go towards new programs, so you need to consider whether you have the capacity to take on something more ambitious (noting also any fund matching requirements). It is rare that you can spend grants on salaries to perform existing work. It’s important to tailor your application to the organisation you are applying for. Ideally, you should know who they are (and even better, they know who you are) and their aims and objectives to ensure your business align with what they do.
- Retain key customers. Often we spend so much time looking for ‘new’ customers that we forget that it is much cheaper – and beneficial – to retain existing customers. They might even refer other customers to you! I get many of my podcast listeners this way, and that’s also how I often select new podcasts. Retaining key customers is especially important at this time of disruption. Even if you are not open for business, what are you doing to keep in touch with your customers or let them know what you are doing? In March, I had 14 AirBnB cancellations. My priority at that time was doing the right thing by my guests so that I would have return customers – and the strategy has worked!
- Invest in good advice. Good advice is priceless. If you aren’t sure of something, get the right advice! Don’t find out too late that you have a tax problem or that you haven’t protected your intellectual property rights. In my business start-up phase, I’m prioritising good advice from my regional business centre. The business adviser there has years of real-life experience and can often spot problems or issues in a business plan, including mine.
Serina Bird is author of The Joyful Frugalisa, host of a podcast of the same name, and founder of The Joyful Business Club. She left her secure public service job in late 2019 – just as bushfires and pandemics hit! She’s had to be frugal in her start-up phase, and she believes these habits have ensured she is agile.
