- The most essential reason for starting a business is to make profits. To achieve this, a business must be able to function with minimal expenses.
- While cutting costs is essential, only cut back in ways that will not be detrimental to your business operations.
- There are various methods of cutting costs; you should pick what best suits your business's structure.
Statistics show that 7 in 10 businesses fail, and cash flow undoubtedly plays a huge role in one's success or downfall. No matter how creative, hardworking and intelligent you are, if cash is scarce, there is no way your business can grow. Many small business owners find themselves in the same boat: chasing investors, believing that's the only way they can get extra money for office laptops, furniture or other necessary items for their business.
Perhaps one of the biggest mistakes business owners make in the beginning is not using the right money-saving strategies. Here are five ways you can cut business costs without hiring unqualified workers or making risky moves.
1. Use open-source software.
A lot of businesses invest in expensive software that can be easily replaced by free programs. For example, the Microsoft Office suite starts at $499 for professional use on one computer. Multiply this by 10, and you've got a hefty bill to pay just for one piece of software.
On the other hand, Google Docs, Sheets and Slides have most of the features that Microsoft Office offers – for free. Some software can't be replaced with free software, but if you are having a rough month and can't afford to pay the monthly subscription for your software, there is a solution for you as well. You can download trial versions of many software apps at Softpedia.
2. Downsize your office space.
Downsizing your workspace is never fun, especially if you have a lot of files and documents to store. A smaller office space doesn't have to be a permanent solution, though, and even if it is, you can free up some space in your office by storing documents or furniture in a business storage unit. Another option is to use flying shelves instead of chunky cabinets to maximize the space available.
3. Hire remote freelancers.
Perhaps the biggest money-saver is hiring freelancers for remote work. If your workers can do the same job that they do in an office from the comfort of their own homes, why would you pay for office rent, furniture and utilities? The biggest winners are the business owners who cut a large portion of their expenses by not investing in office space.
Despite common belief, you can keep your workers motivated without meeting face to face every day. There are plenty of free applications out there that can help you set up weekly meetings. If you aren't into fancy software and want to keep things simple, you can just use Skype.
4. Hold your workers accountable.
Many of us are guilty of this one: We are often busy but not productive. Your workers aren't any different, and they go through many of the same struggles. Focusing on one thing for eight hours a day, every day, is no easy task.
A popular opinion now is that the eight-hour workday makes sense only if you work on an assembly line, not if you do intellectual work. Rather than require your freelancers or employees to work eight hours each day, advise them to track their productivity and figure out how many hours they actually concentrate on one task. Often, employees can stay focused and accomplish the same amount of work in less time.
Further, there are many apps, such as employee monitoring software, that can help you track where your workers go online, how much time they spend on certain websites and how much time they actually spend working.
5. Rethink your marketing strategies.
Small businesses and startups can't copy what bigger players do to promote their products and services. When you're worried about how you'll pay the bills this month, it may not be feasible to invest in branding and outbound marketing tactics that might take months to yield returns.
Instead of putting your money in advertising, take a simpler approach: Advertise your services on websites like Craigslist. Ask friends and family if they need your help or if they know someone who does. Search for Facebook groups related to your industry and post in them. Facebook ads are also inexpensive compared to advertising on other social media platforms.
In addition, for just a little bit of time and money, you can create a website for your business on platforms like WordPress or Squarespace, where no coding skills are necessary.
According to American Express, here are some additional ways you can slash costs in your business.
6. Reduce production costs.
- Sell leftover items such as metals, cardboards and papers instead of sending them for recycling. This will add to your business income streams.
- Use a suitable space to run your business. Any unused space can be let out to other companies.
- Establish ways to track and measure the operational efficiency of the market, and use the results to identify areas where you can optimize available resources. Put in place a business framework that is indicative of your efficiency goals, and provide rewards when goals are met.
7. Lower your insurance and banking expenses.
Compare the rates of different insurance providers and ask your insurance company to match the lowest rates. Consolidate your insurance policies with the company offering the best prices. (Keep in mind that you are not duplicating insurance policies, as this will be an additional cost to your business.)
It is also essential to consolidate your bank accounts. This will reduce the bank charges you incur. Don't take on any debts that aren't essential to your business, and consult a financial advisor before taking on significant debts that you think are necessary.
8. Develop effective time management strategies.
Optimized time usage reduces the cost of running a business. Ensure that tasks are done within the allotted time. When employees take longer than usual to accomplish a job, it cuts into the time they would use to perform other tasks. Minimize time-wasters and distractions. Set specific times set for meetings in advance and stick to them.
9. Utilize virtual technology.
You can reduce business costs by operating virtually whenever possible. For example, virtual meetings reduce travel expenses and the need for office space. You can also centralize your document storage in Google Docs or other document management software as opposed to storing hard copies of paperwork. According to Gordon Tredgold, automation of business processes will also result in cost reduction.