“It’s not your salary that makes you rich, it’s your spending habit.” – Charles A. Jaffe
Another important element of building successful businesses is to be able to maintain core business activities at a reduced rate. Becoming cost-effective is never easy as it demands constant search of innovation or creativity to achieve fully-optimized success.
So, how do you save company’s money while maintaining its performance? There are several ways to do so depending what stage your company is; whether it is in the startup or growth phase. Nonetheless, I’ll share ideas from my previous startup and will leave it to you to mix and match accordingly. Here it goes:
1. Keep Workforce Small
Keeping your team small is a no-brainer for new startups. It keeps your company’s salary budget low. Why I’m stressing this is due to the amount of work your company will save from taxation filing during financial year audit – whereby accounting firms often charge you based on number of compiling and filing that occur.
If you feel your business needs workforce, you can always opt for part-time or project based employees instead.
2. Reduce Company Tax
Nobody likes paying taxes. We worked too hard to earn it to simply give it away. While tax evasion is a crime, you can always minimize the amount of tax value as follow:
- Defer your income till the following month of auditing year – This is a popular move by companies. Your company can’t be taxed if the money hasn’t been formally received. Contact your local accountant or read on this detailed description of how to do it.
- Spend Your Cash Reserve on Equipment/Real Estate/Vehicles – The reason to invest your company’s money is to keep your profit low for the financial year. Based on the Lembaga Hasil Dalam Negeri (LHDN) website, tax rate is reflected by the company’s income. If your company makes RM50,000-70,000 p.a., a 16% tax will be charged on your first RM50,000 and the next RM20,000. For sake of argument, let’s say your company makes RM60,000 which falls in that range. A 16% tax will be charged to your first RM50,000 and the remaining RM10,000 similarly. The total amount of company tax you need to pay is RM2400 + RM1600 = RM4000 for that financial year. In short, the rule of thumb is companies that make less than RM500,000 pays 20% tax and those that make more will pay 25%.
- Invest Company’s Money in Investment/Insurance/Unit Trust – There are a number of insurance companies in Malaysia which offer good insurance plans. Since I’m not here to promote them, it would be best I leave it to you to decide which insurance company to pick. Paying insurance is beneficial to your company since it is tax-exempted (although I have found some to fall under ‘tax-claim’ which is different). Another great thing about it is that these insurance plans are protected under PIDM which is a government body that recovers up to RM250,000 worth of money in case of losses – which is good. Forcing your income to be invested reduces your earnings before interests & taxes (EBIT) which puts your company in categories that pay lower taxes.
3. Rent Furniture For Office
It only makes perfect sense to rent your office furnitures instead of buying it. There are companies in Malaysia such as Art System that offers such services.
They offer a minimum of 6 months contract to rent the office equipment at varying prices. Once agreed, the company will help to deliver the furniture and even help move to another office in case you need them to for a lower fee compared to calling a mover company which can be costly.
4. Use Google’s Free Services
I love how great Google supports small businesses throughout the world. One of its business supports are its Google Account. This includes free email, free online cloud database, free spreadsheets, free presentation slides and so on. These are basic necessity for every online business, and Google are providing it for free. Obviously, there are limitations but these support are enough to start your business. You can always purchase premium services once you can afford it.
Another great advantage to Google account is its ability to be shared among your peers. For example, you can make any adjustments to your Google Calendar schedule and it will automatically be updated for everyone else to see. You can even add an emergency note to your business marketing strategy and your peers will immediately see it too. In short, all the changes you make can be seen ‘live mode’ as long as the document is shared with them.
Here’s a list of all the support systems which I utilized in the early days of my startup:
- Google Drive – Creating documents, spreadsheets, presentation slides etc
- Gmail – Free Email service
- Google Newsletter – Perfect for entry-level email marketing.
- Google Calendar – Great for creating work schedules and easily shared with your peers/employees.
- Spreadsheets – Google’s equivalent of Microsoft Excel
5. Build Own Website
Even if you are an average internet user, you will notice the amount of ads posted on building your own website all by yourself. The most active companies currently would be Wix which completely simplifies website building.
I have never used Wix before, so I can’t really share you in details about it. However, I’ve used WordPress and still am, which honestly speaking, works tremendously well.
What’s great about website building these days is that there are a number of online merchants such as Theme Forest (my favorite 3rd party online merchant) that sell themes for your website. Simply pay for the selected theme and install it on your website.
From my personal experience with WordPress, it’s mostly click and activate to get things done for your website. Most important of all, I feel it is much more user-friendly, mostly thanks to its clear interface.
It may seem a huge task to undertake in building your own website, but it will be worth it considering how much money you will save from hiring a developer to build your company’s website. Keep also in mind, many of these web developers even charge you additionally if you request them to fix errors on your website whereas if you contact your own content management system (e.g. WordPress etc), the engineers might fix it for you on the spot – depending on the nature of the case.
In addition, even if you do need help on fixing issues related to your website, there’s always freelancers which you can find online who can help you for a lower rate. My favorite would definitely be Upwork as I’ve used this quite often back then.
6. Hire Company Secretariat With Accounting And Legal Services
This comes down once you’ve officially created a company such as the Sdn Bhd. I’ve learned that it is important to hire a company secretary that offers accounting and legal services as part of the whole service package.
While some company secretaries do offer such services, be careful with those which do not. If your company secretary outsources to another accounting and legal firms, your cost could double – if not more. In addition, you will also save a lot of time and hassle not having to meet all three different companies at a time. Keep in mind these firms also have other clients which makes it difficult for you set up appointments or related work.
Final Two Cent
In short, Charles A. Jaffe is right. What makes you rich is not how much you make, but also how do you spend it. Although he was talking from a personal financing angle, it is applicable to business just as well. You can make all the money in the world but if you waste, or invest it in a wrong place or simply reckless spending, you’ll ought to lose all that money. But I digress. You might feel some of these tips to be too overwhelming to undertake. It’s fine. Simply mix and match what you are likely to adopt and follow up with the rest once you are ready.
“Share with me what are your saving tips in running your business in the comment section below!”