You may be researching methods to cut costs for your small business. Maybe your business isn’t getting the sales you projected or maybe the customer needs are changing. Whatever your reasons, cutting costs will solve many issues. Think about ways to reduce your startup costs and expenses. What have you done or what do you need to do to make your small business a success?
Here are some top methods for you to cut business costs:
1. Reduce Your Overhead
Consider the overhead costs and think about your location. Do you need an office? Could you move your small business to your home or could you have a shared space office with other small businesses? This may be an option if you have employees who would only come in and out for meetings.
What is a shared space? You share office space, meeting rooms, and break rooms with other businesses. You can also pay more to have a guaranteed office or pay less to just have a desk in an open space. Either way, there are benefits such as meeting other business owners and striking up conversations to develop your business further. Maybe those other startups can offer you the services you need and vice versa.
Does everyone need to work in an office? Can you offer remote work options for your staff? This could cut down on your overhead expenses while offering a benefit to your employees.
2. Create a Detailed Budget
Cut costs by creating a detailed budget to track your income and expenses. You can see where you are spending money. Budgeting forces you to analyze your expenses closely. You are able to identify areas where you are overspending and where you can reduce costs. A budget can also help you prioritize your essential expenses. This way you can allocate your money to critical areas of your business. Develop a budget for every major expense. Understand the categories and keep track of those expenses. If you start going over your budget, you may be increasing your revenue in that area. When that happens, you may want to increase your budget in that category.
3. Employee Training
Invest in your employees to improve productivity and reduce errors. Exceptional customer service is vital to the success of your business. If your employees aren’t performing well, have they been trained well? When your staff improves their efficiency and reduces errors, you are saving money.
4. Reduce Your Office Supplies
Another way to reduce overhead is by reducing your office supplies. By keeping an office supply budget, you can limit how many pens, paper, toner, and other office supplies you may be over purchasing. If you have five employees who can buy whatever they want and expense it, then you may have a problem. By creating a budget and designating one person you trust, you should be able to cut your office supply expenses.
Also, consider buying your supplies in bulk to get discounts and reduce more costs.
5. Review Your Inventory
If you are selling goods, you should ensure you don’t have too much inventory. You don’t want to run out of stock, but you don’t want overflow either. Monitor and keep count of your inventory. For example, some items may not sell as well, or they may sell better during certain seasons. When you have adequate inventory controls in place, you will have a better handle on your high and low-selling items.
6. Evaluate Your Marketing Tactics
What are you doing to get customers? Are you spending too much on marketing that doesn’t work? Be creative and research best practices. Craft messages that resonate with people. Get rid of marketing plans that don’t work well. Research best practices online too. Focus on digital marketing strategies like social media, email marketing, and content marketing. These are low-cost or free. It is important to create a strategy and content calendar so you will be consistent. If you aren’t sure about the best tactics to use, there are many free classes online.
Furthermore, collaborate with other businesses for joint marketing efforts. If you own a janitorial company, you could collaborate with real estate agencies that specialize in commercial properties to offer cleaning services to their clients. You can collaborate with event planners to ensure venues are spotless before and after events. When approaching another business, be sure to highlight any specialized services you offer. Develop mutually beneficial marketing strategies, bundle service packages, and referral programs.
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7. Use Low-Cost Technology
There are many low-cost or free options for your business to use. Research and try some of them to find out what works best for your small business. If you are paying too much for technology that you could get cheaper, consider an alternative route.
Use digital tools. There are many free and low-cost software tools like project management, scheduling, communications, and time clock software. For example, what are you using as a time clock system? An app like ezClocker can help you keep track of your time for each job. It is simple, easy to use, and affordable. There is even a 30-day trial. Your employees can use their own mobile devices to clock in and out. A GPS timestamp is also recorded so you can verify the location. You will also have the ability to add customers, jobs, and hourly rates so you can determine how much a job will cost before invoicing your customers. It is a great way to see if you are spending too much time on a job and getting paid what you should.
Consider technology such as Dropbox or Microsoft OneDrive as a backup for your documents. Also, what accounting software do you use? QuickBooks is great for small businesses and there is even a mobile app where you can quickly input your purchases.
8. Review Payment Options
How do you collect payments? You can use Square, Venmo, PayPal, and other ways to collect payments so you can ensure you offer safe payment options. People may feel more secure in these options rather than giving you their credit card information. The fees and processing times may be easier and cheaper for you too.
9. Reduce Large or High Equipment Costs
You may be considering purchasing new equipment to be able to offer your customers a new service. For example, if you own a landscape business, you may want to invest in a new mower so you can get bigger projects. Consider any major equipment cost and determine if renting is a better option than buying.
Also, consider refinancing your debt. Explore options to refinance high-interest loans or credit card debt to lower interest payments.
10. Offer Low-Cost Benefits to Your Employees
You may be looking at methods to keep your employees. Owning a small business is great for many reasons, but sometimes employees leave because they want benefits.
There are low-cost benefit options such as paid leave, 401k or IRAs, training or tuition reimbursements, flexible spending, employee wellness, and perks such as offering flexible hours that can be low-cost. Develop a benefit budget and brainstorm some different ideas.
You may not be able to offer health or dental insurance until your business grows. However, you should be able to find benefits that are low-cost. Offering these resources will help prevent turnover. By offering benefits such as flexible schedules, remote work options, and performance-based bonuses, you can attract top talent and save on expensive benefits.
11. Manage Your Cash Flow Issues
Developing cash flow strategies can help you prepare for any decline in your business. Ensure you forecasthow much money goes in and out of your business. By forecasting, you can see where you may have underestimated an expense or revenue.
Also, don’t try to cut costs by trying to put everything on sale. It is good to run discounts every once in a while. However, if you cut your business revenue too much, you will find yourself not making a profit. Consider cutting expenses before you cut your revenue.
If you are running into a short-term problem, consider small business loans or research other revenue streams.
12. Outsource Work
Consider your staffing needs. Could you outsource work to freelancers or hire interns for a cheaper option? Upwork is a great tool to get freelancers and interns who want valuable experience. You may have to spend time training, but you may also find a future employee as well. Interns can also handle some of the more mundane tasks so your other employees can do more revenue-building tasks. Some areas where you could outsource work is bookkeeping, IT support, marketing, HR, and other tasks. You can even hire a virtual assistant if needed.
13. Other Ways to Cut Costs
Identify ways to eliminate any inefficiencies in your business operations. Also, review other small business productivity tools that may help save time and are low-cost. Research and learn from others the best ones for your business.
If you take time to do your budgets, try new programs and research best practices, you will save money and cut costs. Don’t rush into something because it seems easier. You shouldn’t take shortcuts that may hurt your business in the long run.