6 Ways to Cut Costs In Business
You've been ordered to reduce your department's costs by 10%, 20%, or 30%. How do you do it? (hbr.org)
According to Bloomberg, 8 out of 10 small businesses fail within the first 18 months. (moneycrashers.com)
According to Global Workplace Analytics, 50% of the U.S. workforce holds a telework-compatible job and 80% to 90% of workers want to be able to telecommute at least some time but only 20% to 25% telecommute at all. (moneycrashers.com)
First, don't expect to reach your target with a single big idea. You'll need a combination of 10 or more actions. Second, match the kinds of opportunities you examine and implement to the degree of cost reduction required. (hbr.org)
1. Reduce supply expenses.
Save money on office supplies by contacting vendors to let them know your price shopping. Look outside your pool of traditional vendors. Large discount suppliers like BJ's, Amazon or Wal-Mart can often beat traditional office supply vendor prices.
2. Cut production costs.
As a business owner, you're always looking for ways to cut material costs, and optimize your resources. Here are a few suggestions:
Try selling leftover cardboard, paper and metal instead of sending it to the recycling centre. Also, consider ways to use your waste to create another product.
Make sure you're getting the most out of your production real estate. Centralize or consolidate the space necessary for production. Lease unused space to another business or individual it can be as small as an office or as big as a warehouse space.
Track and measure the operational efficiency of your business, in order to adjust and optimize the use of available resources. Set performance parameters that reflect your efficiency goals and offer incentives when those goals are met.
3. Lower financial expenditures.
Look at your insurance policies and financial accounts for places to save money.
Save money on insurance by comparing providers for the most competitive rate; then ask your current lender or insurance provider to match that rate.
Consolidate insurance policies or bank accounts if possible.
Evaluate insurance policies to make sure you're not over-insured or duplicating coverage.
Don't take on unnecessary debt. Do a thorough cost-benefit analysis and future forecasting when considering business expansion. Consider the opportunity costs and the effect of debt payments on cash flow. Excess debt affects company rating, interest rates and the ability to borrow in the future.
4. Modernize your marketing efforts.
Of course, you don't want to eliminate paid advertising that is working; however, it can be worthwhile to take a look at some cheaper alternatives.
Build your customer e-mail list and implement a referral program. A recommendation from a current customer is far more likely to result in a sale than traditional marketing.
Network more, advertise less. Clients are more likely to hire a business with a face they recognize.
Cut marketing costs by doing more in-house.
Increase social media use and reduce traditional marketing.
5. Focus on quality.
Quality sells whether in the form of products or services. Satisfied customers increase sales through referrals and repeat purchases. Higher quality and a solid reputation allows you to charge higher prices, which equals higher revenue and a healthier bottom line.
What have you done well so far this year? What are you planning to improve?
6. Keep a virtual office
If most of your team works remote and you don't have an ongoing need to gather at one place, why should you bother to pay huge rent for the office space? Business meetings can be held at any venue, co-working space, or conference hall. However, you still like to keep things looking professional and earn your credits, right? And occasionally you do need to fax something or print a bunch of promotional materials. If that is it, most virtual offices provide you with temporary printing solutions at a flat rate; VoIP phones with a personal voice message box;
a dedicated receptionist handling your calls and a bunch of other cool perks that tend to cost a tiny fortune when implemented at a regular office.
These tips should allow you to budget for expenses more accurately, and ultimately reduce your operating costs. If you can do this consistently, while also increasing the amount of revenue you bring in , there will be nothing left to stop your business from becoming profitable. The more you learn and the more experience you gain in this area, the more intuitive it will become. Keep investing in your financial skills and always work to manage your money better. (due.com)
Extra Tip: Operating Cost
What are operating costs? (quickbooks.intuit.com)
Operating costs are those required for the day-to-day maintenance and administration of your business. (quickbooks.intuit.com)
Even if your company is financially stable, though, cutting costs in business provides multiple benefits: Reducing the likelihood that you will run into cash flow problems in the future leaving more money to invest in expanding or improving your products or services Providing cash to outsource small tasks or hire additional staff increasing your profit margin by lowering operating costs allowing you to offer lower prices, which differentiates you from competitors Whenever you save on operating costs, you have more money to put back in your business, which creates more opportunity for future growth. (business.com)
Having a flexible team working on a per-project/task basis will significantly reduce your business operating costs, improve overall key performance indicators, and will allow you to focus on more important tasks while minor things are getting solved by your dedicated virtual assistant. (lifehack.org)
Be Proactive These tips should allow you to budget for expenses more accurately, and ultimately reduce your operating costs.