How To Save Money in Business: 10 Proven Strategies for First-Year Success

When it comes to the costs of starting a business, entrepreneurs often learn quickly that the financial realities of doing business don’t always match initial expectations.

According to a 2021 survey by Clutch, 35% of small business owners reported spending over their business budget.

Where did their forecasts go wrong? Did they overspend in certain areas? And what could they have done to reduce costs? Turns out, there are some financial missteps almost all founders make in their first year—-and most of them are avoidable. 

To help you avoid these same pitfalls, we interviewed successful Shopify store owners to find out what they would have done differently in their first year and what financial advice they’d give new entrepreneurs. We also pooled the top resources from our blog so you can dive deeper into each topic. If you’re starting your own business, you’ll want to keep this list handy.

How to save money in business: Understanding the basics

Learning how to save money in business starts with recognizing that every dollar counts, especially in your first year. Effective money management isn’t just about cutting costs—t’s about making strategic decisions that maximize the value of your spending while minimizing unnecessary expenses.

The foundation of saving money in business is understanding where your money goes and finding opportunities to optimize spending without compromising quality or growth potential. This requires both careful planning before you launch and ongoing vigilance as your business develops.

1. Create a comprehensive financial plan

The first step to hitting your financial goals is actually writing them down. Many first-time entrepreneurs find the process of writing a financial plan either too overwhelming or unnecessary in the early days, so they skip it altogether. If you’re tempted to do the same, think again.

Creating a financial plan forces you to take inventory of where you are right now, where you want to be, and how you want to get there. It also helps you make better decisions in a pinch, and forces you to remember the big picture when you’re feeling bogged down by the day to day of entrepreneurship.

What’s more, just the process of writing a financial plan can save you money. Financial planning isn’t just about forecasting or predictions either. Even the simple things, such as opening a business bank account or taking time to understand financial statements go a long way toward potential business success. Managing finances isn’t the most glamorous of business-building tasks, but it remains essential nonetheless.

📚Resources:

• How to write a financial plan
• A detailed guide to writing a useful business plan
• Business plan template: A framework to streamline your next business plan

2. Build a strategic network for resource sharing

The bigger your professional network, the better. Every person you meet could be a potential adviser, customer, or partner. And in the early days, it can actually help you cut costs significantly by turning your time and skills into currency. 

Not to mention, the easiest way to accurately forecast how much money you’ll need to invest in your business is to talk to people who have started similar businesses, or who advise those businesses. Accurate financial projections can be the difference between finishing the quarter strong and not having enough funds to remain open next month.

Some tips for building relationships with like-minded entrepreneurs and small business advisers include:

• Take charge of your personal Facebook, Instagram, and LinkedIn pages, letting your network know of your new business venture, what help you might need, and what you’re offering in return. Join Facebook and LinkedIn groups that are relevant to your business or industry, as well as more general groups related to small businesses.
• SCORE’s mission is to support small business communities through mentoring and education. In the US, it has a huge network of volunteer expert business mentors and has helped more than 11 million entrepreneurs since 1964.
• Backstage Capital is a community of investors, mentors, and entrepreneurs focused on supporting Black founders and underrepresented groups in entrepreneurship.
• The Fireweed Fellowship is an accelerator and hub empowering Indigenous entrepreneurs in Canada with courses, mentorship, professional coaching and much more.
• As the world opens back up, Meetup.com makes it easy to find local groups of entrepreneurs, whether they’re operating in your industry or talking through specific issues. Browse topics like "Small Biz" and "Small Business Owners" to find meetups near you.

Those who have gone down the road before you can offer incredible insight into how to improve your startup’s financial health. Experienced entrepreneurs in your network are a treasure trove of knowledge and insight. From business finance best practices to financial management tips, one or two of the right connections can make all the difference.

3. Leverage free and low-cost digital tools

Every small business owner wishes they had more time and resources at their disposal. But free goes pretty far these days. Don’t hire employees or buy pricey software until you’ve tried some tools out yourself and know exactly what you’re looking for. In the early days, just focus on experimenting, seeing what works and what doesn’t, then rinse and repeat.

Some popular free tools and apps you want to check out include the following:

• Logo Maker helps you create professional-looking logos and social media assets without any design experience.
• Burst allows you to browse and download free, high-resolution photos for your website or commercial use.
• Modern accounting platforms like Xero now offer comprehensive accounting, invoicing, and payroll services with AI-powered expense categorization, starting at $15 per month with a 30-day free trial.

Automation tools that save time and money

Implementing automation tools is one of the most effective ways to reduce costs in your business. These tools can handle repetitive tasks that would otherwise require manual labor, freeing up your time to focus on growth-oriented activities.

Shopify has many automation tools available to help streamline and automate business operations, freeing you up to spend time on more valuable tasks. Shopify Automations engage customers every day with automated marketing, while Shopify Flow allows you to build custom workflows to help run your business more efficiently.

“I was using Wix before, and it was really easy to build the website, but I needed to have a website that could handle more,” says Hannah Perry, owner of Floof Cotton Candy. “Shopify really just made my business feel more professional, and it saves me a lot of time in communicating with customers. It was a big step, but it was crucial to do because I really needed more from my website." 

Some cost-effective automation options include:

• Email marketing automation tools that send targeted messages based on customer behavior
• Social media scheduling platforms that post content across multiple channels
• Inventory management systems that automatically reorder products when stock is low
• Customer service chatbots that handle common questions and requests
• Accounting software that categorizes expenses and generates financial reports

LEARN MORE: If you’re just getting started, Shopify’s list of Free Business Tools includes everything from logo makers to purchase order templates. And if you’ve already decided to launch your store on Shopify, the Shopify App Store has thousands of free apps to help you grow your Shopify business.

📚Resources:

• Best video editing tools for small business owners
• How to capture your own high-quality product shots
• Small business accounting software
• Best free Shopify apps to grow your Shopify store
• Top ecommerce automation tools to save time and money in your business

4. Invest in product research and validate your idea

With your product idea in mind, you may feel inclined to leapfrog ahead to production, but that can become a huge financial drain if you fail to do any product research or validate your idea first. Understanding the logistics of business operations before you go all-in on your idea is incredibly important. Your new business doesn’t start until you’ve actually validated your idea.

If you’re manufacturing your own product, you should be spending the better part of your first year investing in research and development. And once you have a prototype, you need to validate that other people will love it just as much as you do. 

Product validation ensures you’re creating a product people want and will pay for, so that you don’t waste time, money, and effort on an idea that won’t sell.

“I kind of went down this whole product development pipeline to try to understand how to create it and basically spent about a year and a half developing it,” says Ann McFerran, founder of Glamnetic. “But I did all the research myself and I realized that every answer that you ever need to find is out there on the internet now. And about a year and a half later, I came up with the prototype, which then got launched.”

There are several ways you can validate your product ideas, including:

• Talking about your idea with family and friends
• Sending out an online survey to get feedback
• Starting a crowdfunding campaign
• Asking for feedback on forums like Reddit
• Researching online demand using Google Trends
• Launching a Coming Soon page to gauge interest via email opt-ins or pre-orders

Companies that don’t spend enough time on product research and validation and jump ahead to branding and marketing their product often spend more money revisiting their product designs later.

Marcia Hacker, founder of Sauipe Swim, says she got distracted by packaging and product photography and invested too much in those areas when she should have been focused on product development. “In hindsight, we should have taken a step back and figured out how to design our [swimsuits] the right way,” she says. “We rushed, and I’ve had to spend a lot of years making up for it—and financially I’m still paying for a lot of those early mistakes.”

Her number one lesson? “Don’t rush product research,” she says. “Evaluate your market. Follow successful competitors for a few months and see how they do things. Then invest in the shiny things.”

📚Resources:

• How to develop a new product (from concept to market)
• How to validate your product
• How to conduct a competitive analysis

5. Implement cost-effective marketing strategies

Startup marketing is tricky, especially if resources and expertise are limited. And even if resources aren’t limited, pumping money into paid ads doesn’t guarantee you sales. 

Make sure you’ve covered the following bases before running any sophisticated campaigns:

• Choose the right social media channels for your brand. And once you’ve chosen your platforms, make sure your brand is showing up consistently and constantly on all platforms.
• Optimize your website for sales. It only takes a second for a customer to form an impression of your website. Everything from your homepage navigation to your site speed to your checkout experience needs to be on point.
• Grow your email list. You can link to offers on your website that capture email signups (e.g., 15% discount for signing up), or use your social media accounts to host a free giveaway in exchange for contact information. You can even start doing this pre-launch with your Coming Soon page.
• Reward loyalty. It’s more affordable to make money from loyal customers than it is to find new customers. Consider a loyalty program for your VIP customers, or offer them discounts for referrals.
• Cross promote with complimentary brands. Cross promotion allows you to partner with related businesses who can market your services in exchange for you marketing their services-at no cost to either of you.
• Get to know micro-influencers in your market. Are there any local influencers in your space who might be interested in your product? Offer them some freebies in exchange for a mention on their platform.
• Identify key performance metrics (and track them). You’ll want to get familiar with Google Analytics to see how your website is performing and where you’re losing customers. And if you’re running paid campaigns, calculating customer acquisition costs is one way to see if your marketing efforts are working.

Digital marketing approaches with high ROI

Implementing the right digital marketing strategies is one of the most effective ways to reduce costs in your business while maximizing your reach and impact. Finding the right tools to help you execute your marketing strategy can amplify your campaigns.

“I think email accounts for 54% of our sales,” says Vicky Pasche, co-founder of Dapper Boi. “We use Klaviyo. It integrates within Shopify. So it’s really awesome, because we’re able to segment all of our customers based on different events. It’s the information we’re able to grab and how efficient we can be with our marketing efforts.”

When it comes to getting the most bang for your marketing buck, certain digital strategies consistently outperform traditional approaches:

• Content marketing. Creating valuable blog posts, videos, and guides that address your customers’ pain points can drive organic traffic for years with minimal ongoing investment.
• Email marketing. With an average return on investment (ROI) of $36 for every $1 spent, email remains one of the most cost-effective marketing channels.
• Social media marketing. Platforms like TikTok and Instagram allow you to reach targeted audiences without large ad spends if you create engaging, shareable content.
• SEO optimization. Investing time in optimizing your website for search engines can generate consistent, free traffic over the long term.
• User-generated content. Encouraging customers to share their experiences with your products creates authentic marketing materials at virtually no cost.

The key is to start small, measure results carefully, and gradually scale up investment in the channels that work best for your specific business.

📚Resources:

• How to build your own brand from scratch in 7 steps
• How to write product descriptions that sell
• Customer acquisition: How to profitably gain new customers for your business
• Driving traffic but no sales? Here’s how to diagnose and improve your store
• Marketing in Shopify: Grow your business with Facebook and Google ads
• The beginner’s guide to analyzing Shopify reports and analytics]

6. Optimize your shipping and fulfillment costs

In the era of free shipping, smaller merchants are getting squeezed in their attempt to stay competitive with the likes of Amazon. Where big brands with high shipping volumes can negotiate lower rates with carriers, small businesses with lower shipping volumes have no bargaining power.

Typically, that means they have to settle for high rates and absorb the shipping costs if they want to offer their customers affordable shipping.

So, before you do anything, ask yourself:

• Are you going to pass the full cost of shipping to your customer, charge a flat rate, or absorb the shipping cost yourself?
• Are you going to get free packaging from a carrier or use branded packaging?
• Are you going to ship internationally?
• Are you going to insure and track packages?

How you answer these questions impacts your overall costs, so understanding them early on will ensure you allocate enough money for shipping.

“Shipping at low volumes directly through FedEx or USPS was way more expensive than I expected,” says Mike Copeland, founder of Loophole Pedals. “If I could do it again, I would go straight to Shopify. I would’ve saved a lot in shipping costs.” 

Shopify Shipping offers negotiated rates with multiple carriers across North America, Europe, and Australia, with an average savings of 40% on shipping costs compared to standard retail rates. 

📚Resources:

• The beginner’s guide to ecommerce shipping and fulfillment
• International shipping: Everything you need to know
• How do I price and implement a strategy to handle returns?
• How to reduce shipping costs as a small ecommerce store
• Independent businesses share their sustainable packaging and shipping solutions

7. Manage tax obligations strategically

Tax laws and regulations are complex and can change often, so staying on top of your tax obligations is critical if you want to avoid penalties or hefty fines. More than that, understanding tax laws means you can take advantage of some real cost savings.

There are many ways for small businesses to legally reduce their taxes. Some tips to keep in mind in your first year:

• Hold onto your business receipts. The parking fee on the way to meet a client, the coffee you picked up for the office—all of these small costs add up over time and can be written off as business expenses if you’ve held onto your receipts.
• Find home-based business deductions. If you run your business from home, you may be able to deduct a portion of home-related expenses, such as heat, electricity, and other home maintenance.
• Employ a family member. In both Canada and the US, small businesses are allowed to hire family members for income sheltering purposes. (Check with your country’s revenue service to see what options are available to you.)

Still, we strongly advise you to consult a tax professional to help you navigate tax laws and policies for your business.

8. Reduce overhead with remote and hybrid work models

One of the most significant cost-saving opportunities for modern businesses is embracing remote work arrangements. The traditional model of maintaining a physical office space comes with substantial expenses that can be reduced or eliminated by working from home and remotely. 

Remote work can help your business save money through:

• Reduced or eliminated office space costs (rent, utilities, maintenance, cleaning)
• Lower equipment and furniture expenses
• Decreased commuting reimbursements and travel costs
• Reduced need for office supplies and services
• Potential tax benefits for both the business and employees

Beyond the direct cost savings, remote work often leads to increased productivity and employee satisfaction. Studies show remote workers typically take fewer sick days and report higher job satisfaction, which reduces turnover costs.

For businesses that still need some physical presence, hybrid models offer a middle ground, allowing you to maintain a small office space while still capturing many of the benefits of remote work. This approach can be particularly effective for businesses with seasonal fluctuations in staffing needs.

9. Negotiate effectively with vendors and suppliers

Building strong relationships with your vendors and suppliers isn’t just good business practice—it’s a crucial cost-saving strategy. Many small business owners accept initial pricing without realizing there may be room for negotiation.

“Sometimes you really want to work with the better factories, but they have these high MOQs [minimum order quantities],” says Marcus Milione, founder of Minted New York. “I would still try to get a meeting. Then go in, be honest, and tell them, ‘Today I’m not going to meet your minimums, but we’re growing at this rate. Trust me, and if you’re open to it, let’s grow into this partnership together.’”

Effective vendor negotiation strategies include:

• Consolidating purchases with fewer suppliers to increase your buying power
• Requesting volume discounts for larger or recurring orders
• Negotiating extended payment terms to improve your cash flow
• Exploring early payment discounts (often 1% to 2% for paying within 10 days)
• Asking about seasonal promotions or end-of-quarter deals
• Proposing mutually beneficial partnerships or co-marketing opportunities

When approaching negotiations, come prepared with market research on competitive pricing and be clear about your needs and constraints. Remember, successful negotiation isn’t about winning at the supplier’s expense—it’s about finding arrangements that benefit both parties and foster long-term relationships.

For new businesses, even a 5% to 10% reduction in supply costs can significantly impact your bottom line and help extend your runway during those critical early months.

10. Review and minimize recurring expenses

Subscription and services creep—the gradual accumulation of recurring monthly charges—is one of the most common drains on a small business’s finances. These expenses often start small and seem insignificant individually, but collectively they can represent thousands of dollars in annual spending.

The time and energy spent managing freelancers and service providers can also take your focus away from growing your business.

“My biggest regret is not doing the CFO [chief financial officer] services in-house and learning it myself or having somebody on my team to be running the financials,” says Aliyah Marandiz, founder of Sugardoh. “Every time we hired a fractional CFO, they weren’t involved enough in the business to make a difference or to see the hurdles that were coming up.”

To combat the issue of recurring expenses:

• Conduct a quarterly audit of all services and recurring charges
• Evaluate each service based on actual usage and return on investment
• Consolidate overlapping services where possible
• Downgrade plans for services where you’re not utilizing all features
• Consider annual payment options, which often come with discounts
• Set calendar reminders to review free trials before they convert to paid subscriptions

Creating a centralized system for tracking all recurring expenses makes this review process more efficient and ensures no subscriptions fly under the radar.

Start saving money with Shopify

Here’s a quick reminder why launching your business on Shopify is the right move. With Shopify you can:

• Build a professional website and brand with no coding or design expertise required
• Offer your customers flat or free shipping because we’ve negotiated the lowest possible carrier rates on your behalf
• Promote your products and create marketing campaigns with Shopify Email, or through any of our channel partners, like Facebook and Google
• Choose from thousands of free or affordable apps to help you grow and manage your business
• Hire from a list of Shopify-vetted experts for the specialized tasks you can’t manage on your own

Illustration by Isabella Fassler