As a small business owner, one of the smartest ways to maximize earnings is to minimize business expenses.
Fortunately, you don’t need a business degree to get a firm grasp on the basics. Whether you own your own company or run a side hustle in your free time, learn how to cut business expenses so you can keep more of your earnings.
Get on a business budget
What are your start-up costs? What annual and monthly recurring business expenses do you have? The more you know about where your money should go, the more you’ll save on unnecessary expenses you might regret later.
Make it easy on yourself with a budgeting app — after all, they’re not just for personal budgets. Mint, for example, helps you keep track of one-time fees, fixed ongoing fees, variable ongoing fees, and optional expenses.
If you have money saved to invest in your side hustle, great. But if you’re thinking about taking on debt to cover business expenses, reconsider.
That’s not to say it’s never a smart idea, but first, try and find another way that could result in increased revenue without the burden of new debt and associated interest fees.
Keep the same approach in mind when charging to a credit card. It’s a nice convenience for business expenses, but aim to pay off the balance every single month. Balance already too big to pay off all at once? Get tips on making a pay-off plan.
Almost everything you need for your business costs money, so take advantage of any opportunity you can find to trade for what you need instead. Swap your writing chops for someone else’s graphic design, or trade your social media expertise for someone else’s tech support.
Barter one-on-one with someone you know or get involved with a formal exchange program like BizX. Just keep in mind that though you’re not receiving cash for the work you’re providing, you’re still expected to pay income tax on its value.
The smaller your side hustle, the more inclined you probably are to do everything yourself.
But time is money, so do the math and see if it might actually be cheaper to outsource some of your work. Continue to do the things you’re really good at and represent the core of your business, but outsource tasks you don’t enjoy or aren’t great at.
Ask about corporate rates
You don’t have to be a big corporation to get a corporate rate.
For example, if you’re traveling for work, call the hotel and ask if they offer discounts to business travelers. (Just be sure to call the local hotel number and not the 800 number, as you’ll probably have a better chance of getting a deal.)
If you travel there often, let them know you’d love to stay at their hotel every time if you can get the discounted rate. (Choosing hotels with lower occupancy rates helps.)
Take small business tax deductions
Save as much as possible with these small business tax deductions. Be sure to consult with a tax expert, who can offer advice for your specific situation.
When you work for an employer, you pay half of your Social Security tax and your employer pays the other half. When you work for yourself, you’re responsible for paying the whole thing.
Fortunately, half of your self-employment tax is tax deductible. Use Schedule SE (Form 1040) to figure your deduction.
Business use of your home
If you are using any part of your home exclusively for your business, you get a tax deduction for it.
Maybe your home office is an entire room or just part of one. Either way, measure the square footage of what you’re using (exclusively for business) and divide that by the total square footage of your home. Use Form 8829 to figure your deduction (for a portion of rent or mortgage and utilities).
Second phone line used for business only
Don’t get a second line if you don’t really need one, but if it makes sense for your business you can deduct the expense.
Office supplies, equipment, and software
Save your receipts for these deductible business expenses, to be recorded in Schedule C (Form 1040).
Other business-related expenses
All sorts of other expenses required for your business are tax-deductible, so keep track of things like travel (airfare, Ubers, mileage), advertising, legal expenses, repairs and maintenance, taxes, and licenses.
You’ll be asked for all of these (and more) when filling out a Schedule C.
Health insurance premiums
If you don’t have health insurance through an employer and you don’t qualify through a spouse, then you can deduct the expense of paying for your own health insurance.
Any money you contribute to an individual 401(k) or IRA is tax deductible.
Know when you need an attorney
When it comes to legal matters, you may feel most comfortable having a lawyer take care of it for you. But why pay an expensive attorney to do something you can do for yourself?
The US Small Business Administration (SBA) lists five legal matters you can probably take care of on your own:
- Naming your business and claiming a trademark
- Setting up the legal structure for your business
- Filing and registering paperwork to start a business (e.g., licenses, permits)
- Creating contracts and non-disclosure agreements
- Creating buy-sell agreements
However, there are four scenarios in which the SBA says you need an attorney’s help — when you want to form a corporation, file a patent, deal with litigation, or buy or sell a business.
Go with your gut
Though a small business should take every opportunity to save money, it should never be at the expense of the quality of your work or integrity of your company.
If the cheaper option doesn’t feel right, don’t do it. At a minimum, sticking to a budget, taking your tax deductions, and staying out of debt will save your side hustle a ton.
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