10 Tips To Cutting Business Costs
Struggling businesses usually scramble to find ways to cut their costs before they go so far into debt they’ll never recover. Saving money, however, is an option for businesses that are not in financial trouble, either. No matter what your checking account looks like, there are probably ways you could cut costs, and there are several advantages to doing so.
Employing some basic cost-cutting measures can provide capital to take on new projects, make infrastructure improvements, or initiate business expansions. Knowing how to cut business costs can mean the difference between stagnant and steady growth. It is a good idea to investigate some ways to reduce business costs, no matter how your business is doing.
10 Ways to Cut Business Costs
Running a business means facing increasing taxes and fees on an annual basis. The costs seem to multiply exponentially each year, and the challenge is to balance those costs with revenue. When revenue holds steady, the costs have to come down to maintain that balance. If you are wondering how to reduce costs in business, here are some money-saving techniques you can implement right away:
1. Go Green
Changing some of your business practices to be more environmentally friendly can actually save you money. Energy is one of the largest costs most businesses face, so by reducing your energy consumption by even a small percentage, you can cut some business costs. There are products available to help you cut energy consumption, like LED light bulbs and programmable thermostats. You may want to get an energy audit of your facility by a professional to see exactly where you could be saving money.
Other green business tips include reducing your consumption of renewable supplies. For many businesses this comes down to paper products. There are plenty of ways to cut down on your use of office paper, for example. Managing documents in digital format, not printing emails and even sending electronic messages instead of writing notes will all help you cut down on paper usage.
By going green in your office kitchen, you can also save money. Install a water dispenser in place of all those water bottles. Encourage employees to bring in a reusable coffee mug instead of using disposables. Keep rags in the kitchen to clean up spills, so employees do not use large amounts of paper towels. Analyze your monthly supplies bill to see where you can gain the most savings.
2. Hire The Right People
Employees are the largest expense for most businesses, and that money is paid up-front, before those employees are able to start making money for your business. It is essential to retain employees long enough to capitalize on that up-front investment you make in hiring them in the first place. The longer an employee stays with your company, the less money they cost you.
The goal is to employ people who make money for your business — more money than it costs to retain them. That means hiring people who are capable of doing the job and growing with your company. The right combination of experience and training can make the difference between a good hire and a great one.
One thing to keep in mind when you hire is salary versus benefits and other perks. When you offer a higher salary to a job candidate, you are locked into that increased cost over the long-term, plus you will be paying an increase in all the costs and fees related to that salary as a percentage. In comparison, it is far less expensive to offer a signing bonus, a one-time fee, as a hiring incentive.
3. Cut Down On Meetings
The old saying, time is money, is certainly true in business. Whether your employees are hourly or salaried, you pay them for the amount of work they put in each day. One way to keep employees engaged in productive tasks throughout the day is to avoid meetings that pull them away from their work.
Some times meetings are necessary to coordinate multiple facets of the project. However, no work is actually accomplished in a meeting. It is just preparation and planning. Every hour of meeting time is an hour taken away from getting the work done, multiplied by the number of people in the meeting.
Before calling a meeting, decide whether your goal can be achieved by some other means. It might be more cost-effective for you to walk around and get a status update from each member of the team for the report you are compiling. You could also send a group email with the information you need to give the team. Cutting down on meetings will help productivity remain high, saving money.
4. Know When To Outsource
When you outsource the right services, you can save money in your business. The key is figuring out what things to outsource and what to keep in-house. Many offices, for example, have water and coffee supplies delivered rather than sending someone to the store to get them on company time. Not only does this save money, it allows employees to focus on their work tasks and not be distracted by “housekeeping” chores. The more time employees spend focused on their core tasks, the more productive they can be.
There are a number of different business services you can outsource to save you the time and money of doing them yourself. Notary and signing services, for example, are cheaper and easier to outsource rather than handle in-house. The cost of notary training for one or more of your employees plus license renewal and continuing education can add up. Then, you end up interrupting that person’s work every time you need a document notarized. It can be much cheaper and easier to outsource your notary needs and keep all of your employees focused on their work.
5. Choose The Right Office Space
Overhead can be a major expense that seems necessary, but it really isn’t. You need a place for your employees to work, and selecting the right space can save you money. Instead of renting office space in a premiere office park, think about some alternatives. Maybe buying a small building outside of town would be a cheaper option in the long term, or sharing office space with another business. If you shared office space with a business you partner with often, it could be more economical and save time.
If some of your employees worked from home on a rotating schedule, you would not need such a large office. Maybe developing a business model where you went to your customers instead of maintaining a location for them to visit you would be more economical. There are a number of ways you can re-define your office space to be more efficient and save money.
6. Cloud Computing
Most businesses spend a lot of money on software and equipment just to run the business. These costs seem to increase exponentially each year, including renewing license agreements, updating software and replacing hardware. If your business requires specialized software for things like communications and logistics, your bill is even higher.
You can save a portion of that money by taking advantage of cloud computing. There are applications available in the cloud for every business function, and they cost significantly less than the traditional tools of business. You can replace your entire server with cloud computing and data storage and save money on hardware and maintenance.
Another benefit of cloud computing is access from multiple devices and any location. You can reduce overhead costs by allowing employees to work from home or other remote locations. All of the tools they need are in the cloud and are accessible to them from wherever they are. People like to use their devices like smartphones and tablets. With cloud computing, employees have flexibility of using the devices they prefer — and happy employees are more productive.
7. Cut Down On Travel
Sometimes the best thing to do is meet with your client or your team face-to-face, but it’s important to be selective about when these opportunities are worth the spend. Cutting down on travel can save your business money and can make your team more productive at the same time.
A meeting that takes place via videoconference might tie you up for an hour. The amount of wasted work time grows exponentially when you have to travel a half hour to and from that meeting. Phone calls and conference calls can often achieve the same outcome without the travel expenses. Skype, FaceTime, GoToMeeting and a number of other applications are free or very inexpensive compared to driving even across town.
Travel expenses are one place that every business can save money. Even training can be accomplished without leaving the office There are webinars available on every topic imaginable. If you want to save money, think of alternatives before you or your employees hit the road for another work event.
8. Gently Used Office Furniture
Used office furniture is available almost everywhere at a fraction of the price of new. Most used furniture dealers (yes, there are dealers) refurbish each piece, so no one would ever guess the furniture is not brand new when it’s moved into your office.
When large companies remodel their offices or change the color scheme, they buy expensive new furniture. The old furniture, still in perfectly useable condition, is acquired by a used furniture dealer. They bring the furniture back to their warehouse, touch up the paint, replace some of the fabric, repair minor imperfections and sell it to smaller companies that cannot afford brand new.
Office furniture is different from home furnishings. The aesthetic appeal is important to consider, but the key feature of office furniture is function — does it include adequate surface area for working, and does it conform to your work-style? Rather than buying new office furniture for an expansion or to replace broken or inadequate pieces, consider buying gently used office furniture. It will save your business money, and no one will really notice.
9. Rework Your Marketing Strategies
Most businesses spend a lot of money on marketing efforts that do not ever produce. By reviewing your marketing strategy, you can find places to save money. Start by eliminating marketing efforts that are at least a year old if you cannot document how they have helped your business. Sponsoring a hole at the biggest gold tournament in town may seem like a good investment, but if you never sign any clients from the event, it is an expense you can do without.
Do not continue to renew print ads or other marketing efforts that bring in a very low return. Instead, save that money or reinvest it in a better marketing strategy. You may not notice those fees creep up each year. By reviewing your marketing strategy on an annual basis, you can cut costs that are not working for you.
Marketing is necessary, of course, but there are ways to achieve the same results for less money. Social media and other internet marketing opportunities provide a broad reach for little of no investment. Compare the cost and reach of one print ad to a couple of Tweets. With the right strategy, you can harness the power of social media, improving your marketing results for a fraction of the cost.
10. Ask For Referrals
Marketing your business can be an expensive proposition, but without marketing, no one knows how to find you or what products and services you offer. It costs more money, however, to market to new customers than it does to get repeat business from those customers. If you are maintaining your client relationships, and getting repeat business from them, you are already saving money.
To add to your savings, ask those current customers to refer people they know to your business. Marketing starts by hunting down the people in your target demographic, and even that step costs money. Your current customers do not need to look far to find your target demographic because they belong to it. Chances are pretty good that each one of your clients knows several people who match that target group. By asking them for referrals, you are saving money on your marketing efforts and getting your message directly to your target audience.
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