Every small business faces the same challenge: how can you generate as much revenue as possible, while keeping costs down? The wider you can keep the gap between your revenue and your expenses, the faster you’ll be able to grow your business. For many business owners, the ways to increase revenue seem obvious – you can release new products, create a new marketing campaign, and more. Cutting costs is a different matter. If you cut costs too much, you’ll limit your growth potential, which is what you’re trying to avoid. So with that in mind, here are a few tips you can use to cut costs without significantly harming your potential profits.
One of your largest expenses is likely your staff. No one likes to let people go, but sometimes this is an unfortunate reality if you need to cut costs. However, you should eliminate jobs without a plan in place to replace the workload somehow. For this you have two likely cheaper alternatives.
First, you can outsource some of the simpler tasks. If you have current staff handling things like data entry or customer service, these are the types of tasks you can outsource. Nowadays it’s easier than ever before to find more affordable labor outside your business. Of course, there is some risk that the work will be of a lower quality, so you’ll have to weigh this against your expenses.
Another option is to automate some of the tasks. Technology now exists that can either improve the efficiency of your employees, or do the jobs for them entirely. Automating some tasks is typically cheaper than having a person do it, since you don’t need to worry about salary or benefits. You won’t be able to automate everything that needs doing, but even if you can have technology handle one or two tasks, it will likely save you some money.
Let Employees Work from Home
If you don’t want to eliminate staff – and this is an admirable goal – there are still other ways to reduce costs. For example, you can allow your employees to work from home. Let’s say you currently run a small office. If you establish a “Work from Home Friday” policy, that’s one a day a week where you won’t have to open the office. This means less office supplies getting used, and your utility bills will also be lower. Many people also prefer the convenience of working from home, so this is a win-win situation.
If you can’t set aside an entire day, look to set up more of a communal workspace in a smaller office. With this system, anyone who can work from home is encouraged to do so, but they are able to grab a free desk when they do come in. Everyone else who has to work in the office will then be assigned a desk. With this sort of system, you may be able to move into a smaller office, thereby reducing costs.
Choose Operating Hours Strategically
Along these same lines, you should think strategically about when your business operates. As an example, let’s say you run a small restaurant. Over the course of a month you track how busy you hour each hour of the day, each day of the week. At the end of the month you realize that no one really comes in on Mondays, but that you’re busy right up until closing time on Fridays. With this information you could close down entirely on Mondays and stay open an hour later on Fridays. Since you won’t be open during non-busy hours, you’ll save money, while catering to the habits of your customers at the same time.
Analyze Your Shipping Methods
If your business requires that you ship things out on a regular basis, it’s a good idea to analyze your current shipping strategy to look for cost-saving opportunities. For instance, you may be sending out individual packages one at a time, when it could save you money to ship in bulk or on the same day. You should also look to see that you’re using the correct size postage, or if another shipping provider can offer you better rates. To learn more about your shipping options, look into freight vs parcel shipping, then explore different options for shipping providers.
Examine Every Little Details
To save money on your business, you really need to examine every little detail. Are you using energy efficient appliances? The correct sized storage container? Are your employees getting enough done during the day to justify their pay? The above tips are some of the biggest opportunities to save money, but you can also save a lot by cutting back in small ways throughout your business. So, take the time to explore every inch of your business, figure out how you’re currently spending your money, then look for ways to cut back.