How to Cut Business Costs?
Running a business costs money. There is just no avoiding it. Whether your own brick-and-mortar retail store or small e-commerce company, every type of business has its own set of costs and expenses. Small businesses are constantly facing increases in their expenses, so controlling costs is crucial.
You may never be able to completely eliminate these costs, you can reduce your expenses significantly with a few simple changes to your everyday business operations.
Reduce Office Space Costs
Do you need to operate your business from a commercial real estate premise? If not, there are many benefits from running your small business from your home or to go mobile. Not only will you save money on leasing out an office space, when you operate your business out of your home you will also save on insurance, business taxes and utilities.
If you do need to operate your business from a commercial premise, consider moving your office to less expensive or negotiate better lease terms with your existing landlord.
Cut Back on Staffing
Consider only having a few full-time employees on board and have the rest of the work completed by freelancers and interns.
Freelance and contractors can handle specialized short-term jobs. You won’t have to pay them a full-time salary with benefits, rather you can pay them per project. If you work with a freelancer that really stands out to you, you can consider keeping them on a regular contractor or even hire them full time. By hiring someone who is already familiar with your company, you will also save money on training.
Hiring intern can be a win-win situation. An intern will get valuable experience while you will get low-cost labor. The only problem might be that extensive training might be required to get them up to speed on your procedures and software. Consider these costs and benefits before hiring an intern.
Eliminate Vehicle Costs
If you’re running a service or contracting business, you might require a vehicle for your business operations. You might not be able to complete your need for a vehicle but there are definitely ways to cut back on your vehicle expenses.
Fueling larger vehicles like vans and crew cabs can be very expensive and so can buying a heavy-duty vehicle like that in the first place. Are you willing to settle for something not as new to get you around? Look at online classifieds and cruise dealers to find a used vehicle in decent condition.
If you’re a company that goes through a lot of mileage on your business vehicle, reducing fuel consumption will be quite important to you. While diesel and hybrid vehicles initially might be a large expense, over time these vehicles will save you on fuel and maintenance.
The U.S. Department of Energy has a website that allows you to calculate the “payback period” for a hybrid vs. non-hybrid vehicle. For a vehicle driven 20,000 Km per year, it could take 6 or 7 years to break even with fuel savings on a hybrid given the higher initial cost. The more mileage you go through per year the quicker the payback. The payback period for diesel vehicles is usually much shorter than for hybrids.
If you’re just starting your business and finances are tight, leasing a vehicle has number advantages like fixed monthly costs, the ability to return the vehicle at the end of the leasing period and freedom from depreciation and maintenance costs.
If you are not sure about whether you should lease or purchase a vehicle for your business, consult an accountant so they can review your business and make a recommendation.
Reduce Supply Costs
If you run you run a business like a restaurant, you probably make a lot of wholesale supply purchases. Getting the best deal on the supplies you need to run your business can make a big difference to your bottom line.
As a business owner, you need to be consistently monitoring supply costs by looking out for discounts and considering alternative sources.
Don’t be embarrassed to ask for discounts. Many business offer discounts on products and services to other business with the hope that it will be reciprocated at some point. Increase your odds of getting a discount by putting yourself in the good books of suppliers and other businesses by paying your bills promptly. Some suppliers even offer discounts for early payments.
“Co-operation” is another way of reducing supply costs. It involves finding other business (even competitors) to pool your resources to save money on goods and supplies. This can be extended to other areas of your business too like sharing office space or advertising costs.
Cut Advertising Costs
The average small business spends approximately 1 percent of their revenue on advertising. So, if a company makes $500,000 in a year, they should be spending about $5,000 a year annually on advertising. That figure might be substantially higher for service-based business or business that are just starting out.
However, with more potential customers online than ever before, advertising cost can be quite low. You can build an online presence without spending too much money by creating a Facebook page or website. Make sure to tweet about your business on Twitter and create an email newsletter. These are all affordable ways to advertise online.
You could also consider cold calling, asking for referrals and always carrying and handing out business cards as ways to increase your business’s profile.
Reduce Insurance Costs
As insurance premiums have skyrocketed in the past decade, small business owners have been hit way large annual insurance bills. However, lack of insurance coverage could bring down your business if you ever needed to claim it and it was not there. So it best for your business to get as much insurance as you can reasonably afford.
Business owners should annually review their business insurance requirements. Consult with an insurance broker to review all aspects of your insurance coverage and have them shop around to get you the best deal for what you need. Different insurance providers offer different rates for the same coverage, so it is all about finding the best deals and your insurance broker should be able to help you with that.
Larger business with a lot of insured assets should do an asset review along with their annual insurance renewal to make sure they are not paying insurance for assets they no longer have.
Increasing your deductible is another way to reduce your premiums. Make sure that the amount of your deductible is not so high that it would be unaffordable for your business if you had to make a claim.
You can also save with group rates if you are a member of a business or professional organization. The reduction in insurance costs is often more than the offset costs of membership. For example, organizations such as the Chambers of Commerce offer insurance plans to members.
Additionally, you can be eligible for insurance discounts by upgrading your business premises with fire alarms, sprinkler systems, and security systems or patrols.
Cut Travel Expenses
If your business requires a lot of travel, find ways to cut those costs in half. You can save a lot of money by avoiding unnecessary trip. Instead try using online resources like Skype and Facetime to conduct meetings with people in various locations rather than everyone traveling to meet at once location.
If you must travel, make sure to be smart about your travel plans. Book only Economy tickets to fly and make sure you get hotel deals. Plus, make sure not let your employees charge every meal and other expenses back to the company and instead offer a stipend.
Let Employees Telecommunicate
Allowing your employees to work from home will save you a ton in overhead costs. You will save on office supplies, utilities and maybe even rental costs for your office space. Technology makes it easier than ever for workforces to connect from anywhere at any time, so there is no longer the need to be locked into traditional office spaces.