An old saying goes by; desperate times call for desperate measures. Thus, in times of crisis, businesses, too, undergo desperate time, and one such desperate time can be when they are forced to cut their business costs at exponential rates.
However, before we begin talking about cutting costs, you must have exhausted all ways to raise money, and once you fail in raising funds, only then should you think about cutting costs. Also, contrary to popular opinion, firing and letting go of people should be your last resort. Firing people left and right also isn’t the answer to all your financial woes. So, what methods can you employ to cut your business costs prominently?
- Start Reducing Your Excess Supply Expenses.
You’d be surprised to learn how much you can save money by reducing your supply costs. Every business requires stationary to operate, which unsurprisingly happens to magnify running costs exponentially.
Thus, you can save money on office supplies by contacting vendors and letting them know the prices on which you’re shopping and that you would be ordering their supplies in bulk. Bulk shopping often results in low costs and garners you big discounts as well.
Thus, you are likely to save a lot of money. In addition, you must look outside your traditional pool of vendors. And, if your local suppliers can’t meet your pricing demands, you can always go to large discount suppliers like BJ’s, Amazon and Wal-Mart. Big companies often beat the small ones when it comes to price, and they can offer free shipping too!
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- Decrease Your Financial Expenditures.
Most of the time, financial expenditures can be the biggest monetary leak in your organization. Thus, to cut your costs drastically, you must look at ways through which you can reduce your financial expenditures.
The foremost way of cutting your financial costs is by the implementing the following tips and tricks:
- Analyze your insurance policies and financial accounts for places to save money.
- Save money on insurance by comparing providers for the most competitive rate, and then ask your current lender or insurance provider to match that rate. If they don’t, switch to the one that offers you a better rate.
- Combine insurance policies and bank accounts, if and when possible.
- Evaluate insurance policies to make sure you are not over-insured or duplicating coverage.
- Do not undertake unnecessary debt. Before borrowing money, you must ideally perform a thorough cost-benefit analysis (CBA) and future forecasting when considering business expansion. In addition, you must also take into account the opportunity costs as well as the effect of debt payments on cash flow. Excess debt affects company rating, interest rates and the ability to borrow in the future.
- Also, try opening a savings account that offers yearly or quarterly profits. This will provide you with some extra cash, which can come handy on a rainy day.
- Make sure that you are availing any financial and non-financial benefits that your government (federal, provincial, or state) might offer to your business. Most small businesses are entitled to certain tax exemptions.
- Always hire a qualified accountant to handle your accounts. In the short term, it may seem like an added expense, but in the long run, you would be able to save huge sums of money. An account will also help you identify any leaks that you may have in your system.
- Modernize your marketing efforts.
Unsurprisingly, advertising and marketing for your business can cost a lot of money. Thus, this is the sector where you must really push yourself to save money.
Having said that, it doesn’t mean that you shut down your marketing department. After all, there’s an overwhelming amount of literature that suggests marketing and advertising, if done properly, has a positive effect on the sales and revenue of a business.
However, it won’t hurt you one bit if you opt for some cheaper marketing alternatives. Thanks to the ever-increasing popularity of social media, marketing is cheap and widespread than ever before. So, you can try to incorporate the following tips in your business model to save costs.
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- Go for email marketing. It is efficient, gets you better reach and customers have a direct way to reach out to you in case they wish to do business with you. But most importantly, it’s cheaper that traditional electronic marketing. You can do email marketing by establishing your customer e-mail list and implementing a referral program. A recommendation from a current customer is far more likely to result in a sale than traditional marketing.
- You must network more and advertise less. Clients are more likely to hire a business with a face they recognize, and the best way to network is through referral marketing, where you are referred by your existing customer to a new one.
- Cut marketing costs by doing more in-housework. Your employees might be able to come up with better marketing ideas than a marketing agency.
- Concentrate more on social media marketing and reduce traditional marketing. The former is cheaper and much more efficient than the latter.
- Another helpful tip: Most companies don’t understand that advertising alone won’t garner them high sales and revenues. Concentrating on their product or service will, thus, at all times, they must focus on improving their business, and if they’re business is immensely good, you won’t have to invest in marketing.
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- Embrace Technology
Most businesses aren’t able to cut their costs significantly because they tend to stick to their old ways of operating, and one of these ancient ways of business operations is not embracing modern technology.
Embracing technology, especially virtual technology, can cut your business costs drastically.
For instance, having a virtual meeting with your clients instead of a physical one, can help you reduce fuel and logistical costs.
In addition, there’s an excess of sharing and cloud technology out there, such as One Drive and Google Drive. All this technology can be used in lieu of memos and physical paper to alleviate your business costs. Such technology allows you to record changes in real time, all of which can help you reduce business costs significantly.
- Lower Your Office Space Costs
Perhaps one of the greatest expenses for a business is an office space. Real estate prices go up more than they come down and depending on the area your business in located in, your office space costs magnify.
In addition, you must also take care of maintenance costs as well, which can be an added burden. Thus, if you wish to cut your business costs drastically, you must reduce your office space costs. One way to do so is by investing in a coworking space.
Coworking spaces are a modern and a cheaper alternative to traditional office spaces. They can be customized to your needs, and you only pay for the service (space) that you avail, which can decrease your costs significantly.
Also, unlike traditional office spaces, which you rent for a year or two, and cannot, get out of a lease agreement, unless you pay a hefty fee. With a coworking space, however, you only pay for the time that you’re using the office. Thus, in case of an emergency, like the current pandemic, where you can’t use your traditional office and still must pay the rent, a coworking & shared office space can be a real cost saver. In addition, in a coworking space, you don’t have to pay for maintenance costs.
Doing business isn’t easy, and in most instances, you lose more money than you earn. However, as stated throughout the article, if you try hard enough, you can save money without borrowing and firing people.