According to Bloomberg, eight out of ten small businesses fail. Some fail because they don’t adequately understand customer needs. Others can’t communicate the value of their products and services.
Still, others don’t understand how to promote themselves effectively. Yet, the number one reason businesses fail is the lack of a sustainable business model—they simply spend more than they make.
Small, local brick and mortar businesses are at greater risk because they don’t have endless cash to prop them up when the going gets tough. While those are discouraging odds, there are still tons of businesses that thrive.
If you own a small, local business, you need to look for savings wherever you can find them. There’s nothing wrong with spending money when you have to, but you should rank your priorities.
Take the time to weigh the value of the expenses while considering your overall budget. Here are 5 proven cost-cutting strategies to keep your small business in the black.
1. Hire Remote Workers and Interns
Entrepreneur estimates the cost to hire and train each new employee at about $ 4,000. Eliminate these costs by outsourcing (or “cloudsourcing”) jobs like writing and website design, among others, to highly skilled professionals who advertise their services on sites like Freelancer or Upwork.
Since your contract workers are remote, you save on office space and equipment. Cut costs by hiring college interns who often work for free and can do anything from filing to marketing and communications.
2. Avoid Paying Retail Price
B2B suppliers always search for new business, and they’re willing to give discounts to line up regular customers. Shop around to find suppliers that offer discounts based on how much you buy, the length of your business relationship or how quickly you pay.
3. Reduce Paper Costs
The EPA estimates that businesses spend approximately $ 80 per employee on paper each year. If you have 50 employees, that’s a hefty $ 4,000 annually, not including printing costs. If you’re closing a ton of contracts as well, your paper costs could easily add up.
Reduce these costs by moving from paper to digital files. Some of the best digital filing systems, like Google Docs and DropBox, are free online, and the savings can be substantial.
4. Reduce Energy Costs
According to the Small Business Administration, reducing energy costs by just 10 percent can boost profits by two percent for retailers and four percent for restaurants.
You can achieve that reduction with energy efficient appliances, like those from Energy Star. Switch to compact fluorescent light bulbs, which use about 20 percent as much energy as standard incandescent bulbs.
5. Barter Services
Finally, consider bartering or even exchanging services with other entrepreneurs to help each other out. Chances are, other small businesses in your area are also trying to cut costs.
I have found many that are willing to barter services in lieu of payment. You can use online sites like TradeBank and U-Exchange that simplify B2B bartering.
Ways to Cut Costs Summary
Small businesses face unique challenges but being burdened by operating costs is quite common, unfortunately. Consider making small changes to protect your business profit and avoid overspending on unnecessary purchases and expenses.