When starting a business, we generally don’t get to choose how quickly we grow. Growing quickly is great for generating revenue and keeping us in business, but expenses can grow just as (or more) quickly as our time is spent servicing new growth. This can limit our ability to find optimal solutions for suppliers, financing, accounting, marketing, and anything else necessary to ensure our business is successful. To get our businesses to be as profitable as it can be and operating at its full potential, it’s important to fully understand its largest expenses.
This can be an extremely rewarding process as it creates operational efficiencies that reduce our workload as well as saving us money. It strengthens our relationships with our employees and outside partners as we develop a greater understanding for how their work impacts our business. It minimizes waste as unnecessary expenses are reduced or eliminated. This flows to the bottom line as higher profitability and/or gets reinvested to help us create even more of an impact.
At Atlas, we’ve been fortunate to grow our business gradually over the last five years and learned some valuable lessons. Operating on a small budget we now understand what is truly necessary, what is nice to have, and what isn’t necessary for us. The individual decisions on necessity are unique to every business, but periodically taking the time to evaluate that can be valuable for us all.
1. It's easier to do some things yourself
Outsourcing activities we don’t know how to do can free us up to do more of what we’re good at, benefitting our business. However, with improvements in technology the learning curve for understanding new things is much less steep. Even if there’s something we’d still rather not do ourselves, technology can help simplify these areas and minimize the time and money we must spend on them.
Let’s look at our accounting to see how this can work in practice, as this is something we all must do (this is easily transferrable to all areas of a business). Accountants are extremely valuable professionals. They make sure our books are in order and our taxes are correct and paid on time. As a small business, paying an accountant to do all our accounting can create an unreasonably large expense and still be a large demand on our time. Even when outsourcing 100% of the work (from bookkeeping to filing taxes) we still need to communicate everything to our accountant. The less work we do up-front, the more they’ll need to communicate with us. So, how do we minimize these expenses, optimize our time, and still maintain our relationship with a valued partner?
2. Create a better system
We need to create our own system that’s simple and easy to understand. This takes some time to set-up, but it will save a lot of time (inclusive of the set-up) and money within the first year. Potentially a lot of money.
At Atlas we created a system where all income and expenses go through our company credit card or from/to the company bank account. We have an easy to use excel template allowing us to copy and paste all the transactions we’ve downloaded from our bank’s website. It then itemizes everything to simplify our accounting. This takes less than an hour each quarter once it’s set-up.
Being more involved at first to be less involved long-term can lead to better relationships with our accountants. And we’re paying them less. The work involved in bookkeeping and putting together tax returns for a business that doesn’t do any up-front work can be extremely challenging and is often not the best use of an accountants’ skills. Using a system like this can give us greater appreciation for what goes on behind the scenes and build stronger relationships with our partners.
3. Evaluate all options to reduce your taxes
When there’s not enough time to evaluate expenses there’s rarely enough time to understand and implement tax reduction strategies. With better systems in place, it makes it much easier to evaluate and implement the best tax reduction strategies for our businesses to help minimize our taxes. As business owners, we can save significant amounts of money with a modest amount of up-front planning. Family owned and operated businesses have even more options to reduce their taxes.
Tax reduction strategies are tied to government incentives to encourage business owners to think and act for the long-term, reward employees, and promote increased employment.
4. Partner with an advisor to help guide you in reducing your expenses and taxes, and improve collaboration among your key stakeholders
We can help significantly reduce your recurring business expenses and taxes, and our fees are often significantly lower than your savings in the first year.
With all your extra savings you’ll have more room to grow your business and/or your own wealth. If you’d like, we can also help manage and grow your wealth too.
If you’re considering ways to reduce your expenses, taxes, and grow your wealth, please reach out to us.
All the best,
Mark Donnelly, CFA, CFP®, MSF (He/Him)
Founder
Phone: (410) 900-0005
Email: mark@atlassustainable.com