How to Ruthlessly Cut Expenses in Your Business
As businesses start opening up there may be room to review your operating expenses. So you can can continue to operate with a reduced workforce, and reduced sales. Now is the time to cut your business expenses so you can re-open leaner and meaner. If you’re not sure how to reduce your operating costs, then this article is for you.
How to Optimize Operational Costs
First and foremost, you will need to understand where your money is going. To maximize the income you have coming in you’ll need to follow a few simple steps before you take some action. If you haven’t read our article on Organizing Your Business Fast make sure you have a system in place as it will help you keep your cut your business expenses.
Analyze Spending habits
Pull your reports and statements for the last 6 months. Look for services that you haven’t used or may not need right now.
Make a list of your vendors and suppliers
Create a list and what you pay your vendors and suppliers on average over the last six months. If you need to renegotiate and the contract is coming due it maybe time, see if you can get a better deal.
Automate Manual Processes
If you still do a lot of printing or you have processes that are very manual in nature you may want to rethink through them and see if there are ways to automate your workflows.
Align Costs to Strategy
All businesses spend money make sure that your spending the money on things that help service your customers and grow or stabilize your business. Make a list of your expenses and then ask yourself “Is this cost help service my current clients or get new clients or is it a non-essential cost that I can find another way?
Run Projections on current spending to optimize cashflow
Now that you have your current information and you know what costs will help you and what costs are non-essential here are some common expenses that you can save on
Cut Your Business Expenses and Operating Costs
Reduce Monthly Re-occurring Subscriptions
Now that you have reviewed all your expenses, I’m sure there are a few subscriptions and services that you can cut from your business without missing a beat. If you do find that you need the services, you may be able to purchase them for a year at a time for a substantial discount.
Renegotiate with Vendors and Suppliers
Pay early or on time reduce bank charges and late fees and if you can use cash many vendors will give you 1 to 2 percent discount.
Need a new supplier get at least 3 bids and then ask if any will negotiate additional fees.
Pay early and on time to receive discounts. You’d be surprised at how much you can save by not letting bankers keep fees by charging you for returned checks.
Manage Your Inventory to Cut Business Expenses
There are many ways to reduce the cost of inventory. But one of the most important is to understand the numbers in your inventory so make sure that you have a great way to track your inventory levels. But here are some great tips that will help you.
- Avoid Minimum Order Quantities for new products that you may sell because they don’t have a history.
- Know your reorder point so you can order products at the right time.
- Have sales to get rid of obsolete stock or stock that doesn’t sell
If you need some more information on inventory to cut your business and operating costs check out this article on the Cost of Inventory.
Cut Your Business Expenses for Your Home or Office Space
Cut or Reduce Janitorial Costs
Have a janitor or maintenance service? Renegotiate your contract or hire kids to do it for you. When I was young my dad would pay us to clean his office. This is especially great for younger kids. No reason they can’t dump trash, dust and vacuum it’s not like they’re in school all day.
Print Less or Go Paperless
Print or go paperless. There are many ways to automate processes so you don’t have to use paper. But if you are going to use paper buy recycled toner to reduce those printing costs.
In the market for office equipment? Buy used and reduced the cost. Remember it’s still tax deductible even if you spend half as much.
Cut Business Expenses by Lowering Utilities
I yell at my son all the time to turn off lights especially the pantry light. (Seriously have no idea why that kid couldn’t turn off that particular light to save his life.) So, I went to Home Depot and bought a motion detector light. Easy peasy to install and now no more arguing with the kid. Large corporations have been using automatic lights and timers to reduce their electric bill may be it’s time for you to do the same.
Lower Your Phone Bill
If you haven’t ditched your landline now’s the time. Voice over the Internet phones is cheap, easy to install and cost a fraction of a landline.
Cell phones can run up costs like nothing else. Negotiate with the phone company to see where you can cut the extra costs. Review your bill sometimes they sneak in expenses you’re not aware of.
Share Your Costs with Other Business Owners
If you Rent office space, you may not need as much space as you think. If you have free space another good idea is to rent out the unused portion. Sharing costs will reduce utilities, office expenses etc. You can sign up for a co-working space, but they may be somewhat cost prohibitive as they include a lot of extra fees. It may be easier to find another small solo-preneur or freelancer who would be happy to share costs of an office without all the overhead.
Andrea's Tip
Accountants and lawyers have been sharing offices for years long before co-working was a “thing”. You never know so just start calling around how many business owners reduce these costs by sharing.
If you know some business owners who need to buy office supplies, cleaning supplies, or really any other supplies share the expense and split the bill.
If you belong to an association, they may have discounts that you can use to buy equipment or services and a reduced or discounted price. Also, you can call the association and see if they will discount there membership.
Reduce Your Vehicle Expenses
Cut Maintenance Costs
If you have a fleet of vehicles look to renegotiate your maintenance contract or find a new vendor who can care for your vehicles and a reduced price.
Andrea's Tip
I Love using local mechanics as they are usually cheaper and much more willing to negotiate on prices for preventive maintenance.
Buy More Fuel-Efficient Car
Have a delivery service? Gas prices are low right now but make sure your delivering by location or even invest in transportation software to make delivery by location easy and economical.
Cut Expenses by Using a Gas Reward Card
Use gas reward cards to reduce fuel costs and earn cash and reward points to be used for other purchases.
Reduce Your Insurance Costs
Is your insurance for your home or car up for renewal it may be time to look for better prices. Make sure you get at least three bids to get the best available coverage for a reduced amount.
Cut Down on Marketing Expenses
Marketing can be the biggest money suck, but I don’t feel really qualified to give advice on how to keep these costs down. So, I’ve included some really great articles on reduce your marketing budget while still remaining in business.
10 Ways to Cust marketing Costs Before the End of the Year
Reduce Employee Expenses
I’m not telling you to lay off people, but I can tell you that sometimes you’ll need to reduce some of the perks you offer.
Cut Down on Meetings
Having unnecessary meetings every week contributes nothing. Maybe you can have a board where employees can hang post-it notes on whenever they get a new idea that might contribute to the business. If its worthy you might have a meeting to discuss it. But having unnecessary meetings every week or so is just time consuming and may bore and reduce the productivity of your employees.
Hire Some Temporary Help
Have some overflow work but not enough for a full-time employee? If you’re willing to do some training, hardworking high school and college students are available (especially in the summer!) for low-cost labor. Some organizations will even pay their wages for you.
Maybe you need someone with additional skills then hire an Independent contractor. These workers are more flexible and don’t come with the added costs of benefits. And as your business bounces back you can always add them to your payroll.
Modernize Your Office to Cut Business Expenses
Use Technology to Reduce Business Costs
If you’re using in house servers, it may be time to reduce costs by going to cloud-based or open-source software. There are literally internet-based solutions for everything. From invoicing, to contract signing to phone services. Modernizing your office to save your business and your expenses.
Automate Time-Consuming Tasks
If your staff does a lot of routine work, it may be time to automate the tasks and let them work on more revenue-generating initiatives that align more with your strategies. Everything from redirecting calls to posting updates to social media can reduce the unnecessary workload.
There are a lot of things that your staff may be doing that might be routine work or require no experience at all such as posting updates to social media, redirecting calls, etc. These operations are reducing your work force’s productivity and putting the unnecessary workload on them. These operations can be simply automated through a one-time payment.
Andrea's Tip
Let your employees know that you’re looking for ways to help them do their jobs more efficiently and let them come up with ways to help. You can even offer a cash bonus for ideas that are implemented
Bonus: How to Increase Your Revenue During These Tough Times
Create Partnerships with other business owners
Make strategic partnerships with Co-petitors and build relationships with other business owners to leverage their network
Learn to Barter
Need some help with a function you don’t know how to do? Learn to Barter and trade your services for other professional services that you need.
Negotiate Your Way to Lower Business Expenses
Some of my more successful clients negotiate everything from office rent to equipment leasing to keep their expenses low. Try these tips to keep your expenses down.
Get Bids on Everything
Compare vendors from insurance to furniture and shop around. Use matching as you’d be surprised how many vendors will match competitor pricing.
Putting it All Together
Ruthlessly cutting business expenses can be a challenge but follow the strategic steps and you’ll make your business leaner and meaner and far more prepared for the next steps. If your looking for some help with negotiation with vendors to get the best prices for their services give me a call. I’d love to help you make your business lean.
If you need some help making some business cuts to your expenses, we want to help. Make an appointment today!
Cheers!
Andrea
