Does your bottom line feel squeezed by increased expenses? Are you facing bargain-basement-priced competitors? Controlling costs is important for any small business, but it can become critical in a slow economy or when faced with other market challenges.
Reducing business costs improves your bottom line—either by increasing profit or allowing you to decrease prices to attract more customers and increase your volume of sales. See if any of the following cost-saving tips will allow you to achieve a healthier balance sheet.
- Lower office/retail space costs. Now might be the time to reconsider if you really need all of the space you’re currently renting for office or retail space. Look into less expensive or smaller locations or try negotiating with your current landlord for cheaper lease terms. If your business is service or consulting based, look into co-working spaces or setting up a home office. Both of those options can save on insurance, business taxes, and utilities. If moving locations isn’t an option, evaluate potential savings in using a programmable or smart thermostat to reduce heating and cooling costs and energy-efficient lights. Or change your habits and power down nonessential lights, appliances, and machinery overnight and when not in use.
- Reduce staffing costs. There are several ways to reduce staffing costs: employee more part-time help who require fewer benefits, use freelancers for non-core work, and/or allow more staff to telecommute. Tap into your local workforce for part-time employees—like high school and college students, retirees, and stay-at-home-parents. Freelancers and independent contractors are typically easier to hire and cheaper to keep employed than traditional employees. And telecommuting has proven to have great cost-cutting potential: higher moral and job satisfaction, which leads to higher productivity; reduced office utility costs; reduced need for office space and equipment; reduced time lost to commuting.
- Barter for goods and services. If your business has the time, talent, or goods capacity, you can use it to barter for another product or service you need. Consider exchanging your services or goods for lower rent or other business expense like accounting or web design. There are online business barter exchanges to facilitate these deals and expose you to a wider audience of other small businesses looking to barter.
- Lease instead of buy a business vehicle or large equipment. This is especially helpful early in your business before you’ve made an expensive investment in buying a new business car or office equipment. However, you always have the option of selling that asset in exchange for a less expensive used one or leasing one. Leasing gives you the financial cushion of fixed monthly costs, the chance to exchange the vehicle at the end of the lease for a different model that might fit new business needs, and freedom from depreciation and maintenance costs.
- Cut supply costs. Supply costs are not “set it and forget it” line items. You should be constantly monitoring supply costs, checking for discounts, and investigating alternate sources. If you find a better deal, you can take advantage of the discount or go back to your original supplier and see if they’ll match the lower price. You can increase your odds of getting a discount either way if you pay your bills in full and on time. Some vendors will even reduce your invoice by 2% if you pay in full within 10 days (typically represented as “2/10 net 30”). Look into “co-opetition,” where you pool your resources with another business to save on supplies and goods, usually through bulk order discounts.
- Be smart about advertising costs. Traditional advertising on TV, radio, billboards, and other print media can be expensive for small businesses. Good thing you can get similar returns on investment if you’re smart about advertising online through your website, SEO and SEM practices, e-newsletters, paid social media advertising, and organic social media activity. Offering discounts for referrals to increase word of mouth marketing is also an option.
- Reassess insurance costs. If it isn’t already a part of your business calendar, remember to review your business insurance requirements every year. Your insurance broker will be able to evaluate your current coverage and shop around for the best deal. You’ll also want to ensure you’re not insuring assets you no longer own. As a member of a business or professional organization you may be able to take advantage of group rates.
- Minimize taxes. Don’t forget that minimizing your tax bill also saves you money! Maximize your deductions by keeping meticulous records of receipts and any business vehicle mileage. Speak with your accountant before and after each tax season to see how to minimize your tax liability.
- Align plan costs with usage. Essential business services, like telecommunications, cloud storage, bookkeeping, legal support, etc., that are paid as monthly or annual plans should be reviewed each year to ensure you’re not paying for services you’re not using. See if you can downsize to a cheaper plan or if you need to take advantage of a higher-usage plan to avoid paying overage charges.