How To Reduce Costs For Small Businesses
Running a business is time-intensive and often requires a financial obligation to ensure operations continue running seamlessly and successfully.
However, not every business owner can afford the financial responsibility of running a business. Or can they?
Running a business- especially small businesses- without breaking your bank is possible if you make smarter decisions guaranteed to keep the cost of running your business low.
Don’t know where to start from? We have compiled ten easy methods to reduce the cost of running your small business and not spend as much as you used to.
Ten Methods To Reduce Costs For Small Businesses
Reducing the cost of running your business is not rocket science. It simply requires you to reevaluate your business decisions and operations to look for ways to make smarter choices that will cut your costs while not necessarily compromising the quality of your products or services.
If you have noticed you are making less profit than you should, you are probably funneling more money into certain aspects of your business than you should. While there is nothing wrong with spending money to better your business, this act starts to lose its purpose if you are not making gains and your company’s profitability continues to suffer.
Cutting business costs doesn’t make you a cheapskate or a business owner who does not care enough about their business. Instead, it is quite the opposite. Cutting costs will help you put more value in your business and help you invest money in the facets of your business that truly matters.
Cutting costs doesn’t require a mathematician or laying off your valuable workers. All you need to do is take a step backward, review your business, and create a cost-cutting strategy that will help you improve your business spending habits.
Instead of going in blindly, we have provided you with a list of methods you can use to cut costs in your business and save money.
1. Go Paperless
Do you still use paper in your business operation?
Using papers is not only old-school but a tad too expensive for your business needs. Admittedly, a single purchase of a stack of papers might not seem like much, but have you ever sat down to calculate how much you spend on paper every year? Here’s a tip- you should.
Papers and printing are unnecessary and a waste. With the advent of technology, there has been the creation of more innovative solutions that make it easier to go paperless in your business?
Need papers to make daily invoice records? There are technological solutions in the form of cloud-based invoice software you can use on your mobile. Need files for an important document? You can just file these documents on your computer.
Need paper for fliers, pamphlets, and your menu, amongst others? Who needs that when you can use digital signage to solve your problems. Admittedly, digital signage might seem like an expensive first-time purchase that costs a lot more than papers and printing will cost you at the moment.
However, digital signage is a long-term investment compared to paper. You don't need to purchase digital signage like you need to purchase papers constantly.
2. Create a Business Budget
How often do you make spur-of-the-moment purchase decisions? Do you think to yourself, ‘this purchase will not hurt. I'll just make the money back’?
Purchases like this hurt your business the most. Regardless of the reason, unplanned purchases, especially when done frequently, funnels money out of your business and into an abyss you won't even be able to account for in the future.
So how do you fix this? Make and stick to a business budget.A business budget is one of the most underrated aspects of owning a business. It is more important than business owners give it credit for. Budgeting offers immense financial benefits and plays a role in controlling your cash flow.
Creating a business budget will protect your finances by ensuring you spend money only where and when necessary. Having a business budget will help you drastically reduce your business costs and ensure you make better and smarter business decisions.
Curate a budget by allocating a specific amount of money to different facets of your business. Leave little to no room for adjustments until you start to see positive changes and need to scale up your business.
3. Cut Supply Costs
Supplies undoubtedly contribute to a significant amount of expenses for your business. After all, how will you carry on with production without the necessary supplies?
To save costs, you don’t have to drastically adjust the number of supplies you use and compromise the quantity or quality of your products and services. All you need to do is review the current supply costs and trace your supply usage.
Identify all areas you supply resources to in your business. Note which areas are using more supplies than necessary and those areas that leave excess supplies behind after production. Afterward, you strike a balance.
Shorten the supplies where necessary and ensure you only stock up on supplies you need. Wastage is expensive and will damage your finances.
4. Try Social Media Marketing
If paid marketing- online or offline- is putting a hole in your business wallet, it is time to consider taking matters into your hands and advertising your business on social media.
Of course, this doesn’t necessarily mean you should abandon all other marketing means and focus on social media. Instead, you should cut costs on the other paid ads mediums and supplement with social media marketing.
Social media is growing increasingly popular and has become a popular platform for business owners to build an online community of customers and potential customers.
A study showed that in April 2022, there were approximately 4.65 billion social media users worldwide. This is about 58.7% of the total world population. With so many people waiting to discover your brand, it is a no-brainer that social media is an effective way to build brand awareness and lead potential customers down your sales funnel.
Moreover, social media marketing is completely free in most cases, so you do not have to worry about spending money to use most of the features.
5. Reduce Credit Card Debt
Using your credit card to pay for your business operations might look like a convenient solution to handling business financial necessities. However, this causes more harm than good in the long run.
According to a 2021 study by the Federal Reserve Bank of San Francisco, credit cards are used for 28% of all payments. With credit card interest rates increasing at an alarming rate, what you consider a harmless gesture of swiping your credit card for business expenses might quickly lead to bad debt.
It is easier to accumulate credit card debt than to pay it off. What might seem like a harmless, normal, quick, and easy way to settle all your business financial obligations will end up with you struggling to pay up your accumulated debt.
Where does this get you? Back to square one of paying more money than you can manage.
To avoid this, minimize charging your business expenses to your credit card. The positive effect of this small act might not be apparent immediately, but you will undoubtedly thank us in the long run.
6. Cut Energy Costs
Your energy bill is undoubtedly another area that costs more than necessary. To reduce business costs, you should look for ways to make your office eco-friendly and energy-efficient.
There are lots of ways to cut energy costs. While some methods require expensive investment, some only require small acts to make a difference.
One way to reduce cost is to provide enough insulation. You can do this by sealing your structure if it doesn’t already have enough insulation. You can use weatherstripping rolls and caulk for the job.
You can also try little acts like unplugging equipment that is not being used, turning off lights in areas that are not being used, using sunlit rooms, and investing in smart thermostats.
You can also ask your electrical company for an audit, so you know where all your money is going.
With these smart behavioral adjustments, you can shave a few extra dollars off the amount you usually pay for electricity. This not only helps you save money but ensure you contribute to reducing the average carbon footprint.
7. Hire An Accountant
‘Hire one more person? How will that help me?’
Before you skip this tip, it is important to note that some financial loopholes you can’t see will more than likely be discovered by the expert eyes of a professional accountant.
Accountants are trained to deal with numbers. They can trace numbers to determine what amount is missing and from where. This is exactly the type of skill you need to help you save money and reduce costs in your business.
An accountant will not only easily identify how much you spend on all the areas of your business but also help you review your business spending habits. An account will help you distribute your finances better and will play a significant role in helping you to curate a business budget that will help your business remain efficient.
8. Buy High-Quality Used Items
When setting up or running a business, you will undoubtedly have to buy several amenities to support your business operations. These amenities include furniture for your workplace, necessary machinery, or vehicles. Regardless of what it might be, you will undoubtedly be tempted to buy these items brand new.
While there is nothing inherently wrong with brand-new items, you will spend much more than you need to. Why splurge on new items when you can get high-quality used items that are just as useful?
Gently used items may be used, but just because they are not shiny and straight out of the box doesn’t mean they don’t function just as well. Think about it like you are buying thrifted clothes. When handpicked carefully, you will find gems at very low prices.
The type of gently used items you find depends on what you need. You can purchase items like chairs, tables, decor, printers, copiers, tablets or work phones, bins and even delivery vans as gently used items.
However, it is important to be careful when sourcing these items. Ensure you only buy from trusted sources and don’t purchase faulty items.
9. Use Freelancers
Hiring an employee is more expensive than you think. This case is especially worse if you place an employee on retainer for a seasonal job. While it might be great to have someone to do a particular job within easy reach, it also means you have to spend more on salaries than you need to.
No, we are not saying you should lay off all your employees and downsize. Employees are valuable and get the job done. What you should do instead is outsource your seasonal jobs to freelancers.
Freelancers are cheaper to hire than traditional employees. They don’t require benefits like paid leave, health insurance, or pre-tax retirement accounts. You also only pay freelance workers every time they get a job done.
Sounds good, right?
Understandably, freelance workers can be unpredictable, and the unprofessional or inexperienced ones may disappoint you. This is why you should only source and work with freelancers who are eager to provide a solution for your problem and have proof they provide the services you need.
10. Constantly Review Your Expenses
Even though we have provided a wake-up call for areas you should review for a cost reduction, it is impossible to get results after just one review. Instead, make it a point to review and evaluate your costs regularly.
Regularly combing through your business costs will make it easier to know when your spending is out of place. This will make it less likely to suffer an increase in your business spending habit.
Constantly reviewing your costs will also make it easier to align recurring costs like subscription fees or using vendors you do not need. Constant reviews will make it easier to track all purchases and compare your monthly purchases.
Saying Goodbye To A Small Business With Huge Financial Costs
Making a financial change in your business is not an easy process. Saving money by reducing your business costs requires thorough reviews and planning. Even after going over the necessary aspects of your business, it will still take weeks or months for a drastic change in your business finances to be apparent.
To reduce costs in your business, remember to shave off extra spending when necessary and figure out better ways to make better spending decisions. Although these are small steps that don't look like they will make a difference, in the long run, these small steps will be the best things that ever happen to your small business.