This article will walk you through 7 simplified ways to reduce small business costs
Running a business cost money and as your business grows, so do the costs
To help keep your profits up, you need to be creative about reducing your costs
It really comes down to making smarter choices when deciding how to allocate your funds so that you can improve your bottom line.
Most small businesses tend to focus on generating revenue, and rightly so. Without revenue, you really don’t have a business.
While revenue plays a big role in profitability, so does expense.
Cutting costs will help you achieve the profitability that you’re looking for as well as improve your cash flow.
Cutting cost is hard. It’s not easy and in some situations, it can be painful. It can also be difficult to decide where to cut.
There is good cost-cutting as well as bad cost-cutting.
So, what is good cost-cutting?
It’s really simple. If you can reduce your costs and still maintain the quality of your product or service, then it’s a no–brainer. You’ll win and your profitability will increase!
Bad cost-cutting will always send a message to your customers as well as your employees. You don’t want to get into a situation whereby you are cutting corners instead of cutting costs. When revenue falls or is not growing as fast as you expected, it comes naturally to cut costs, but what you don’t want to do is negatively impact your quality or have employees lose morale.
7 simple and EFFECTIVE ways to reduce small business costs
1. Create a business budget.
Budgeting goes hand in hand with reduced business costs. It’s literally impossible to make smart financial decisions without an understanding of the money that is coming in and out as well as an outlook on the future.
If you are not budgeting as well as keeping a record of all your expenses, you should start now
You can use accounting software such as Quickbooks to help keep track of your financial transactions
2. Review your Insurance premiums.
With insurance rates changing year to year, it’s important to reevaluate your insurance on an annual basis to ensure that you are getting comprehensive protection at fair market value.
If you just allow your insurance to auto-renew every year, you might be paying more than you need to for your coverage. Bundling multiple insurance policies is a way to save money as you get discounts
Also, make sure that you have covered all important areas of your business including workers’ compensation, disability, unemployment, etc
Installing fire alarms, sprinklers, and security systems can make you eligible for discounts
Consider increasing your deductible in order to reduce your premiums. However, make sure that the amount of deductible is not too high that it would be unaffordable for your business if you filed a claim
3. Reduce credit card debt.
Credit cards may initially offer incentives to reduce your immediate business cost, however, with interest and fees, it becomes expensive quickly.
Most credit card issuers only require you to pay between 2% – 4% of your balance each month; however, only paying just the minimum will increase both your total interest as well as your principal as well as the time it takes for you to completely pay off the balance
Call your credit card companies to negotiate lower interest rates
If you have accumulated a large balance, pay as much as possible above the minimum amount required so that you can pay off the balance faster.
Prioritize your credit card balances in your budget so as to eliminate the balances
Renegotiating contracts especially based on market conditions could get you lower prices. In addition, being loyal to a vendor has its advantages. It is ok to let vendors know that you are price shopping. A lot of vendors will give you a good deal if it means you continue working with them.
Switching vendors all together could result in good bargains and while researching new vendors and wholesales can take time, the savings could be enormous therefore worthwhile the effort
5. Low cost/free marketing strategies.
According to SBA, most businesses spend about 8% of their revenue on marketing, and up to 20% for those in highly competitive markets. However, as a small business, experts advise about 2-3% of revenue in order to remain profitable.
Start by building a website online and creating a social media presence
Email is a highly effective low marketing solution
Another option is to partner up with other vendors to throw a community event that will give your business exposure locally – at a limited cost
6. Office supplies
These account for a large portion of your expenditures. Track supply usage so that you can understand what you truly use and get rid of unnecessary supplies. Buying your supplies in bulk could get you some great discounts.
Shop around before your buy. Online shopping makes it really easy to compare prices between vendors
Look out for special discounts or sales.
Buy generic products. The differences in quality are minimal/negligible.
Get into the habit of buying only what you need
7. Recurring costs
Typically, recurring costs are the best areas to look at for any cost savings. Pay attention to those that are automatically renewed, and you don’t notice the monthly payments. They might be a good starting point.
Evaluating your spending and costs will make a big difference to your business. It will also give you the discipline to analyze potential costs before you commit to it.