Recent times haven’t been easy on entrepreneurs, especially those who are small business owners. Many companies have had to cut costs by downsizing their operations and letting some of their staff go to cope with the global economic changes. If keeping your revenue on par with previous years has been difficult for you, know that you’re not alone.
Ways to Cut Costs While Running a Business
- According to payroll services provider OnPay, 32% of small businesses expected a decrease in revenue with the rise of the pandemic, compared with just 4% in 2019. Although the economy is still in the process of recovering, here are a few proven strategies to immediately cut down costs and make your business more profitable.
Revise Your Yearly Budget
Many business owners adapt ready-made budget plans or reuse their budget from the previous years when planning their present year budget. However, the true art of budgeting is to do thorough research and create a plan specific to your unique business needs.
Every business builds itself differently, so what works for your competitors or similar businesses in your industry might not work for you. Besides, a lot can change on the market in a year (especially with a global pandemic), and you might discover that some of the items in your budget plan are no longer necessary or could be grouped together.
Take a close look at the expenses you commit to in your yearly budgeting and adapt them to your current needs. This will help you see clearly where you can save on costs in the long run.
Consider Partnership Opportunities
If you’re a small business owner, hiring other service providers might be a stretch for you. You might even be tempted to try to design your branding assets yourself or spend long hours trying to figure out how to write better copy for your website (we’ve all been there).
It could be a better solution to partner up with other businesses or service providers and exchange services with them. You can consider partnering with an accountant, a marketer, or a business coach, for example, to help you reach your goals. This way, you can access quality services by trading your time and what you do best. Don’t be afraid to partner with competitors in your space, for the experience could be cost-effective and educational.
For example, when a Florida-based law firm wanted to break into mass tort cases, they teamed up with other legal firms to get the job done. Marc Anidjar, the partner at the Law Offices of Anidjar & Levine, admits, “From a cost perspective, aggregating multiple attorneys and diversifying the expense is ideal for the attorney and ultimately for the client, as well.” In addition, the move saved the firm money and allowed them to learn from other professionals in the industry.
Review Your Recurring Payments
The bigger your company grows, the more tools you are likely to subscribe to for your various processes and teams. Unfortunately, marketing tools and workflow management software often take up the biggest chunk of these recurring expenses that we tend to buy and then forget.
The accumulated cost of these platforms is often staggering, especially considering that many aren’t fully utilized or overlap each other.
One of the best ways to save on business expenses is to review all subscriptions and recurring payments in your operations. If you’re managing a larger team, ask your department leads to provide a report for you on all tools and software they’re using. Ask them to include their costs and benefits as well. You might discover that some of them serve the same function or could be solved by a more complex workflow and team management tool purchased for the entire company.
Bring in More Automation
As a business owner, automation should be your biggest mantra. It requires some systems thinking to identify what’s worth automating to reduce expenses and save on labor costs, as opposed to what’s only adding unnecessary processes to your daily operations.
Automation is more of a mindset than a one-time strategy that you should adapt to your team culture. It will help you cut down on busywork, save energy for high-value action, and enable faster progress.
Automation tools like Zapier or Monday can sync platforms that you otherwise waste time jumping in between. Training flows and onboarding materials can almost always be automated. At least, you could automate them to some extent with documented manuals and videos for new team members. For emails and other communication snippets that you’re regularly using, TextExpander is a great solution that can take some workload off your shoulders.
Highlight great examples of automation in your teams and make it a regular practice to review your workflow and develop new automation strategies.
Charge Per Project
If you’re working with freelancers who are paid by the hour, their monthly fees can come up to thousands of dollars each. But, try taking a close look at their deliverables. You might find out that most of their time is spent with revisions or documentation.
Most deliverables can be structured with a fixed rate. It doesn’t matter whether you’re paying per word for your copywriter or per project for a service package. This way, you can anticipate expenses in advance and know what to expect to be delivered to you. Being paid by the project will also motivate your service providers to focus on doing their best job. They’re likely to work more efficiently than asking for multiple revisions and spending time on unnecessary details.
Work With Talented Interns or Career Transitioners
Interns, entry-level employees, and contractors are no longer just fresh graduates straight out of college. Consider that the average person will change careers between five and seven times during their working life. For many workers, this means taking a more entry-level job. This would help them gain the training and skills required for their new career path.
If these potential hires do not possess all the skill sets listed in your position job description, it’s okay. However, they likely bring valuable project management experience and other “soft skills,” which would make each of them an excellent team member.
Hiring these individuals is another notable way to help your business cut costs. They won’t charge as much as a senior professional would. And, they might even be more motivated to learn quickly on the job.
Make ROI Public Between Divisions
Return on investment (ROI) is what you should ultimately maximize when you strive to save money and increase your profit. Unfortunately, this data might not be available for you from other businesses. However, you can establish knowledge-sharing within your own company, or within your network of service providers.
Let’s say that you’re running multiple teams in your company. You can then create visibility for the ROI rate of different marketing and sales teams or projects. This way, you’ll see clearly what strategies work for your business specifically. You will also learn where you should invest more of your efforts. Additionally, this will help you understand what you should cut out completely from your business strategy.
Remember, some projects may have long-term returns or benefits for employees that are not as easily quantifiable but are just as significant for the future of your business. The idea isn’t to pit teams against each other or lessen the importance of long-term strategies. Instead, it is to gain clarity on where you’re investing your efforts and what you’re gaining from them.
If you’re a small-business owner or service provider, you can meet up with other entrepreneurs and exchange best practices to learn from each other. That way, everyone can cut costs, everyone wins. Of course, it’s okay if you don’t have other such entrepreneurs in your network. This is your chance to start building some mutually beneficial connections.
Use Alternative Marketing Strategies
Now that you know what brings in the most cash in your company, you can consider trying out alternative marketing strategies and partnerships. We live in the era of influencers where everyone is a promoter, podcaster, or digital journalist. A lot of small- and mid-size influencers in your niche would be happy to promote your brand. In exchange, these influencers would likely accept freebies or simply a cross-posting opportunity.
There are also a plethora of podcasts, YouTube channels, and other independent media that are continuously seeking out people like you to provide content for their audience. Questioning the importance of these new mediums? Dave Thackeray, broadcaster at The Podcast Guy, states that “Podcasting is engaging, creates a sense of trust and builds customer loyalty.”
You might be thinking that your business isn’t that interesting or well-known; in reality, that might even turn out to be your advantage. The more niche your business is, the more unique it is. This means it will be easier to get into those few channels that share content specifically about what you do.
Digital ad spend is no longer the most profitable option in marketing. This is especially true if you’re an individual service provider or small-business owner who cannot compete with big companies. Instead, to cut costs, you are much better off conquering a blue ocean or partnering with people who share your audience without competing with your offering.
Go Remote or Downsize Your Office Space
The world has gone remote. Establishing a sense of community in your team is still key for employee wellbeing. But, you don’t necessarily need as much office space as you once did. According to a study, “more than 20 percent of the workforce could work remotely three to five days a week as effectively as working from an office.” That means your office likely has a lot of unutilized space and could be downsized and perhaps turned into more of a community space with “hot desks.” This, in turn, could help your business cut costs drastically.
If you’re flying solo or have a small team, coworking spaces can provide a much better option for you. What’s more, these arrangements enable you to engage in networking opportunities and promote your services. Coworking spaces have gained huge popularity over the years, and today there are more than 26,000 coworking spaces worldwide. Many of them can provide you location flexibility, free beverages, and sound-proof call booths. Additionally, they can also provide you with well-equipped meeting rooms. These rooms are probably better than any private office you could rent for your business.
If you’re an individual service provider, you can always just skip renting an office space entirely and move your calls online. Your home office, kitchen table, or even your friend’s garage will do just fine for that, in a pinch.
Try implementing each one of these strategies a week to cut costs. Consequently, you’ll see a huge change in the cost-efficiency of your business.