Accounting & Finance
Minimizing Business Expenses to Maximize Profit: How to Cut Costs
Every year the cost of running a business goes up. This happens for various reasons. Business insurance increases, airline travel, go up, and suppliers drive up prices. Companies are continually battling these yearly increases in expenses.
In some cases, an increase in one area means pulling back in another. Ideally, you never want to cut staff. It’s best to examine other areas before letting go of valued employees. Here are some ways to reduce business costs, keep staff, and improve the bottom line.
Decrease Office Space Expenses
One of the most significant expenses for a business comes from merely operating in the actual space. But depending on where you are, you have options.
One option is to take advantage of commercial real estate and move to a less expensive area. You can also negotiate with landlords to have better lease terms.
If possible, consider running the business from home or going mobile. Depending on your business type, there might not be a need for a brick and mortar location. For example, business-like electrical and plumbing may operate better as mobile businesses go directly to clientele.
Another way to cut business costs is to lower overhead costs. This includes taxes, insurance, and utilities. It is amazing how much you can save just by comparing providers and switching to cheap electricity.
Before cold hard cash, there was bartering. If you have excess product or time on your hands, why not barter goods and services for other goods and services? If you hit a slow season, why not use your skills to save money and perform a service for another person?
One example is that if you are a painter, you can paint the building you rent to reduce or free rent for the month. A talented web designer might redesign a website for a company whose services they also need. These service-to-service approaches can help save money. However, they do require communication and specific timelines between parties to make sure everyone is satisfied. It is a business relationship like any other.
Let Suppliers Compete for You
This one might seem obvious, but it can actually be tricky to approach. Businesses have a lot of wholesale supply costs. It is essential to always find the best deal to make that difference for the bottom line. This means monitoring charges, looking for discounts, and considering alternatives.
Yes, loyalty to a provider is essential, but not if they are unfair in their pricing. You can even take competitor pricing to the existing supplier and ask for price-matching. This gives your consistent supplier a chance to compete for your business before you consider turning away.
Just remember that these deals go both ways. You are more likely to be successful in asking for discounts if you are on time with payments and have no issues.
Studies show businesses spend around 5% of revenue on advertising costs. This can be higher for new businesses, larger business, and service-based businesses. With the ability to attract customers online, however, it is possible to cut these advertising costs.
You can easily use free website builder sites rather than paying for one. You also can create free social media accounts and use free or low-cost newsletter sites. Other cheap ways to advertise include having business cards on you, cold calling, and seeking referrals. It is possible to successfully advertise without full-page ads or billboards.
If you own or run a business, you know time is money, and everyone wants some of it. So you should always think critically about where your time is going and being smart with it.
For example, should you spend an hour driving to a supplier or use their free shipping services? Effective time-management, goal setting, and prioritizing will streamline the day and lead to maximum profit.
Do What Is Best for You
Even as costs rise, the bottom line still needs to be in the clear. Sometimes, this means making tough decisions, but it is about doing what is right for the business and you at the end of the day.