How to Be a Frugal Business Owner

As if it’s not enough that we’re living it, we have to listen to people talk and strategize about it – the recession has put all of us in a spin and it’s going to be some time before we can recover enough to go back to the life we were used to before. But if you think of the situation beyond the surface hardships, in a way, a recession is a great time to learn good spending and thrift habits, whether you’re an individual, a family or a business.

It’s the small and medium businesses that are hit the hardest; with not much of a cash cushion to help them ride out the storm, they have been forced to effect layoffs and salary cuts, measures that don’t win them any points with the employees that remain. One of the best ways to see off the recession is to tighten your belt and begin to live frugally, an initiative that must percolate down from the owner and manager of the business, to the most insignificant employee. You can start your cost cutting measures by:

  • Reducing your electricity and water usage: Offices are infamous for leaving their lights on all throughout the day and night and for appliances and gadgets that are always on standby. This not only causes you to use more power and harm the environment, but also raises your recurring monthly expenditure significantly. Begin by asking your employees to make a conscious effort to not switch on lights during the day and to practice switching them off when they’re leaving a room for some time. Shut down computers, printers, fax machines and other appliances when they’re not being used for a long period of time or overnight. You could also save on paper by using both sides to print or by taking the email route for most of your communication needs. These are small measures indeed, but they sure go a long way in helping you save some money at the end of each month.
  • Minimizing risks: It’s better to take calculated risks rather than foolhardy ones that put you in a hole of debt that is hard to climb out of. Most organizations have gone back to depending on cold, hard cash rather than leverage to do business. And even if they are borrowing money, they do so at low interest rates and pay their bills every month so that the outstanding does not keep rising.
  • Keeping personal expenses separate: Just because you own the company, it does not mean that you have an unlimited expense account. You need to separate your business interests from your personal ones by spending only your salary or monthly allowance on yourself. Remember to look at the long term benefits of making your business grow rather than paying yourself more just because your expenses are too high.
  • Not going overboard: And by this I mean that it’s not necessary to be penny wise and pound foolish – there are some people who try to do everything by themselves in order to cut costs. But there is a difference between being frugal and being plain stupid. When you try to do too much, especially if you’re not sure about what you’re doing, you end up making a mess of it and having to spend more than your original budget in trying to put things right.

This article was contributed by Nicole White, who writes about online web design school. She invites your questions/comments at Nicole.White222


  1. In the not going overboard category, it is also helpful to remember that time you spend trying to save money by doing things yourself takes away from time you have to make money. Hopefully you opened a business doing something you are good at, makes you money and you love. Rolling around on the ground trying to get computers hooked up because you are too cheap to pay someone to set up your network is not a good use of your talents or resources unless you run an IT business.

  2. It’s also important to keep advertising and promotions expenses under control. It’s true you have to spend money to make money and customers have to know about your product in order to buy it, but there’s such a thing as spending wisely. You can cut back on advertising expenses IF you use more than one form of advertising and IF you understand which methods are effective.

    In the last three years, I’ve advertised with pens, business cards, Internet ads, classified ads, public performances, a sign, and a Web site. I’ve not all media are equally effective when it comes to bringing customers in. The pens were cute and popular, but they did not generate even one gig or new student. Probably the most I can use pens for is name recognition. Print classifieds have been mediocre, but on-line advertising has been outstanding. The Web site paid for itself, and all its setup costs, in less than a year even though the first guy I paid to do it didn’t deliver a working site and I had to buy DreamWeaver and make the site myself.

    So I suppose you have to track your advertising and find out how to get the most bang for your buck.

  3. The greatest expense I have – and greatest opportunity I have to reduce costs – is staff.

    I invested in going paperless and it was by far the best investment I ever made.

    Now, we don’t waste time filing or looking for documents. I was able to reduce staff by 30 hours/week.

    My suggestion is to look for ways to enhance service yet reduce costs by using technology to replace man hours.

  4. To me business subject is far more complicated than just to be a frugal business owner. As a tactics sure why not but in a long term frugality not going to make your business profitable. I would call it optimization and not frugality. As a business you should be permanently in optimization mode. Business expenses review and how to minimize them should happen on daily basis (tactics) but the strategy should include things like business development, new markets and so on. Although I agree with the post in general, it does not cover the business overview even from 10,000 feet height.