To increase profitability, the revenue of the company must increase, and the costs must be minimized. The Ultimate Guide to Reducing Your Business Operating Costs has been created to help small businesses find savings on core expenses.
Image by athree23
Prepare A Budget, Set A Goal, And Build A Ballpark
While you may want to cut your business expenses, you shouldn’t sacrifice the quality of your customer service. Cutting back on your magazine subscriptions and opting for the cheapest suppliers will leave you with more cash at the end of the month, but it could also harm your service offering.
You should create a monthly budget based on the average income per month (taking into account seasonal fluctuations), your business model, and your customers’ expectations.
When budgeting, overestimate your spending and underestimate your income. Then your operating expenses will be covered each month.
Minimizing Spend On Utilities
When you own a business or lease a property, utilities are a necessity. It is easy to unwittingly enter into costly contracts because there are no regulations to protect against shoddy deals. In order to reduce business costs, you should start by looking at expenses on utilities.
Depending on your utility needs, you can cut down on your costs by either limiting usage or switching to cheaper suppliers.
For each utility area, there are nuances to reduce usage. There are four easy steps you can follow to compare and switch suppliers:
1. Keeping track of your monthly spend and contract term allows you to see how much you spend each month in each spend area
2. Directly contact six or more suppliers per area of spending to compare
3. Obtain a better price by negotiating with suppliers
4. Switch your suppliers by informing current and new ones, and signing a contract
Consider how you pay for services once you’re certain you’re with the best supplier. Businesses that pay their invoices early or use Direct Debit may receive discounts. Over time, discounts can add up and make the difference between cutting service and keeping it. You should never pay invoices late since the penalties can lead to heavy debt.
Broadband & Telecoms
Telecommunications and broadband are essential tools for communicating with customers. In that sense, avoiding it is a challenge. The following guidelines can help you prevent excess spending by keeping track of your business’s likely usage each billing cycle:
- Each business will need a different bandwidth speed. Software startups require very high speeds to function. However, small cafes that offer free WiFi can make do with lower speeds or a download cap
- VoIP systems are popular among businesses that do not handle many calls, so they can save you money from overpriced telecom packages.
Recycling & Waste Management
There are several ways to reduce waste removal costs, depending on the service your business is using:
- If your business uses a “per bag” service, where your provider collects bin bags for each item created, then reducing the amount of rubbish you produce will reduce costs. Recycling your paper and plastics (i.e., cups, cutlery, and paper towels), as well as encouraging a paperless environment are all ways to do so
- Is your trash bin full every week? Consult your supplier to determine whether or not bin collections can be decreased. If you’re only filling your bins half full each time they’re collected, cutting back on collection frequency could save you money.
Take Advantage Of Technology
Automation of business processes raises efficiency, saves time, and improves customer service. Technology benefits workplace productivity in a big way. Moreover, utilizing the technology we have at our fingertips can also reduce our costs without compromising our ability to deliver quality services.
There are a variety of business functions that technology can automate. Accounting, payroll, marketing, and HR can all be managed with digital software. By automating these types of tasks, businesses can limit the need to hire as many workers, resulting in cost savings. Additionally, automation reduces the chances of human error, so employees will spend less time and money correcting mistakes if automation is used.
Outsourcing Business Processes
Similarly to automating processes, you could opt to outsource processes to reduce staff costs. Marketing activities are most commonly outsourced to agencies. In this way, you can still get reliable results while saving money as opposed to hiring a full-time employee. Some of the most common include web development with services such as WEBX360.COM, financial services, business firms, including Maxim Gorin, and social media management.
There is a range of different options when using outsourcing:
- The website Fiverr may be handy for finding a cheap expert for a one-time job. Consider reading reviews and portfolios of freelancers you are considering to gain an understanding of the quality of their work
- You will be able to build a relationship with someone who can truly understand your business needs if you use an agency for ongoing business needs
- You might find that outsourcing manufacturing to a country with cheaper labour costs is a cost-effective solution for your business but you must also consider the working conditions in which your products will be crafted. You should weigh the ethical sourcing of the products with the savings you expect to enjoy.
Using Less Office Space
In light of the Coronavirus, we now know that many businesses can be more flexible in their office space. This resulted in:
- Using a hotdesking arrangement helps reduce operational costs by allowing remote employees to work from home if you have the capability to do so.
- By downsizing and reducing storage needs, going paperless could save you money
- Although you may have less control over utilities and you may pay half as much for shared services, renting a shared workspace can be less expensive than leasing an independent property.
Employee Perks
The first step to cutting your costs is to cut employee perks. This will save money without reducing the quality of the products you offer (though you might not be too thrilled about making such a change). Consider surveying staff to see where they will be least affected by changes to benefits. Discuss any changes with them clearly.
There are many ways that you can cut down on the costs of running your business. Do you have any other methods that you could share in the comments below?
No Comments