How Small Businesses Can Cut Costs
Whether your small business is going through a bit of a slump or you’re just looking to maximize your profits, there are plenty of ways to cut costs. The best part is, you don’t always have to make major changes or downsize your staff to boost your bottom line.
These 6 ideas will help you to find new ways of operating that will benefit your profit margins:
- Consider Going Mobile or Remote Instead of Renting Office Space
Office space is a major expense for any business. If possible, look into going fully remote so that you can save on this overhead. Yes, there are other expenses to consider if you swap to fully remote operations—decent cybersecurity for your employees and devices, for one. However, this is often far cheaper than the rent, electricity, and all the other expenses that come with a physical workspace.
Alternatively, if going 100% remote isn’t an option, you could look at sharing office space with other small businesses. This way, you get all the perks of an office, but you can split the costs of rental and other sundries.
- Explore Exchanges for Goods and Services
Trade or goods exchanges have been happening since the beginning of civilization. If you know of other small businesses that have what you need, get in touch and see if there is a way that you can help each other out, rather than paying someone.
The key here is to calculate the financial implications of what you’re giving and getting. In some cases, you may be better off just paying, but in other cases, it could be a win-win situation for you both.
- Shop Around for Suppliers or Team Up with Other Businesses to Buy in Bulk
Any business is going to have regular purchases that they need to make—toilet paper for the bathrooms, toner and ink for the printer, items for manufacturing products, and so on. You should be consistently checking that your suppliers are giving you the best deals available. Shopping around is important if you want to save on costs for your small business.
Another smart option is to see if you can get a better price if you buy larger quantities than you’re currently buying. You could team up with another business to get your order up to the necessary quantities, and then you don’t have to worry about the bigger upfront cost of buying in bulk.
- Build Your Online Presence to Cut Advertising Costs
Digital marketing such as blogging, social media, newsletters and SEO can all be done for a minimal cost. The key is to build an online presence to ensure that you’re getting the most out of these free tools. Once you have that initial hard work out of the way, you will start to see that these methods of marketing have a low-cost, high-reward system.
Look at digital marketing as a means of networking. You want to make connections with people on social media, build up brand awareness on Google, and directly talk to people via your email database. You’ll end up spending a lot less on advertising and marketing and still see those customers come through the door.
- Value Your Time Appropriately
A massive mistake that small business owners make over and over again is not valuing their time properly. In an effort to cut costs, small business owners will often take on tasks themselves, rather than pay a professional to do the job. For example, building the company website or doing bookkeeping and accounting are two very common tasks that owners tackle.
However, when you aren’t an expert in these tasks, you take a lot longer to do them than a professional would. What might take an expert a couple of hours may take you an entire day. This means that you’re spending an entire day away from running your business or working on areas of the business where you can make money.
To cut costs, you may need to actually spend a bit of money. Weigh up how much of your time it would take to achieve the task versus how much you would spend if you hired an expert to do it instead. Then, take that rate and divide it by the hours you would be working on it. Now you’ll be able to see the hourly rate you’re giving yourself.
Often, there’s a strong case for getting an expert to work on the task so that you can then work on areas of the business that you can boost and create revenue.
- Reduce Office and Employee Perks Where You Can
From artisanal coffee for the office to unlimited data plans for employee mobile phones, you could be spending a fortune and cutting into your profit margins with perks. We’re not saying that you have to cut away everything and only get the cheapest supplies for the office. It’s more about finding the right balance.
First, you need to know how to calculate profit margins and then do a detailed inventory of all the perks you offer at your business. Take the time to rank your perks in order of importance. Start with those that are vital to the way you operate and work your way down to those that are nice to have. You can start by cutting down or eliminating the perks that aren’t improving the way your business operates.
You can also shop around and see if you can get a better price on your perks. If you don’t have to get rid of the high-end coffee but can rather find it cheaper somewhere else, your employees will be a lot happier, and so will your bottom line.
Cutting Costs Takes Time and Thought
It’s not easy to cut costs as a small business, but it’s important because your profit margins are usually quite low.
With some careful consideration and an honest review of where your business spends money, you can make some changes that will see your bottom line improve. And if you do it right, this often happens quite quickly.