Saving Money for a Rainy Day in Business

When it comes to small business finances, many companies operate just like many American households. Where some families live paycheck to paycheck, businesses often live from payroll to payroll. But smart business owners understand the benefits of saving money in business. In contrast, wise business owners think two steps ahead and prepare now for an unexpected future. Success is a double-edged sword that can cause business owners and entrepreneurs to think differently about money and resources. Success can be a great motivator to continue pushing and growing. Still, unfortunately, many small business owners never understand the benefits of thinking ahead and reinvesting profits wisely—much less saving money for a rainy day.

Every business has highs and lows. Sometimes during those lows, sales become difficult, and cash is depleted. Corporate savings accounts are liquid assets that can be tapped to pay expenses that are more than the current receivables will cover.

Some purchases and investments can only be made, without falling into bad debt, through years of savings. Big companies work on big projects that usually only big companies can accomplish because they have the resources to do so. For example, Disney has expanded into developing its own streaming platform, and Apple is developing a new fitness membership service powered by Apple Watch. Large corporations often stay big because they have the financial cushion to invest in big ideas outside their day-to-day expenses. Small businesses that wish to be big should focus on more significant projects with staying power. Many start up small businesses have no set financial plan beyond staying open week after week. But even a small venture can start saving money in business today for future plans.

They needed cash to invest in things like new trade shows, more raw materials, marketing of the latest products, and overall growth. If they had a corporate savings account in place, they may have been able to put all their plans in motion without any additional help or having to sell company equity to external investors. Although many small businesses may not be able to consistently fund a savings account, it’s an important goal to work toward in helping your business save for a rainy day.

If there is a local, or even global, cause that you and your employees feel strongly about, any time is a great time to start giving back when and where you can. Companies that develop the habit of saving money will find many beneficial reasons for giving back a portion of their profits, focusing on the future. It’s like Marcus always says, “there is no being generous to a fault. Because there is no fault in being generous.”

Here are some essential tips that could put your small business on the right path for a rainy day or future growth. These money-saving tips are from real small businesses that are succeeding in a tough economy. Real people, real companies, and realistic ideas to help you cut costs, lower your overhead, and still reach your target market and build your business:

Employees are crucial to get the job done. Still, employee costs—from payroll, benefits, office space, and insurance—can be the most significant part of your budget. The founder of a Connecticut-based communications firm has said she saves money by keeping the full-time staff to a minimum, and outsourcing work to independent contractors for the overflow work that the team cannot handle as needed.

A cloud-based solution is the number one go-to for thrifty marketing advice experts. But real small business owners will also recommend the same strategy. Many small business owners recommend avoiding the cost of expensive hardware and using cloud-based services such as Salesforce, PayCycle, and Staffmate to house data.

Working remotely might not be an option depending on your type of business, but if it is, it can be a huge money-saver. Some small businesses have never even had a physical office space. Keeping things virtual allows companies to avoid the expense of an office space and the operating costs that come with it (utilities, insurance, maintenance, supplies, etc.) and focus on producing work at minimum overhead. If it makes sense for your business and your line of work, it may be worth considering converting some or all of your staff to a remote-work model.

Does your business really need a daily cleaning service? Some financial experts recommend reviewing ongoing maintenance costs such as these and cutting back wherever possible. There’s no harm in asking your team to empty their trash can on the way out. Reducing the frequency of maintenance costs, like having the cleaning service come in weekly instead of daily, can save money without having to cut the maintenance service in its entirety.

This simple advice from Allen Ash of Almar Sales Co., a family business founded in 1965, is perhaps the most important. Suppose you know your customers well enough to know their online habits. Then, you can focus your online marketing to more granular and cost-effective efforts instead of spreading your resources out over a whole arena of Internet options. Even if you are not in e-commerce, if you know what your customers like, how they respond, what they want, and what they’ll spend, you eliminate all the other options from your budget. Eliminating useless options—which could translate to product sizes, colors, flavors, menu items, or whatever may apply to your type of business—means the money you do spend is more focused and will get a better response. So not only is your company saving money initially, but you’ll be producing more profit from what you do produce.

As you can see, small businesses that can withstand the test of time understand that there will be good times and challenging times. These ups and downs might come in many different forms, depending on your type of business. Maybe your company depends on seasonality or tourism; maybe there’s a market crash that affects your clients’ spending power. Maybe there’s a pandemic that forces you to shut down for some time. Whatever the situation may be, you will be better off if you have a corporate savings account as a safety net ready to catch you, should your business fall. And situations don’t have to be as drastic as a tech or real estate bubble popping. It can be as simple as consumer tastes changing or a new competitor setting up shop down the street.