Managing costs can be difficult for a small business owner. Of course, you should be focusing on sales, but that can be difficult when you’re juggling multiple roles. The other major factor for business success is reducing expenses in order to maintain or increase profitability. Running a small business is like having several full-time jobs. Tasks such as sales, marketing, advertising, inventory, purchasing and more are often handled by one person. Finding ways to work smarter also takes time.
In fact, almost half of all small businesses don’t make it to their 6th year. Add to that a very competitive business landscape. Profit is the equivalent of revenue minus costs. When you can’t always continuously increase your revenue, what you can do is lower your costs–here’s how.
Invest in the gig economy
It can cost as much as $5,000 just to hire and fire a permanent employee, and this does not include the salary or benefits. To cut costs, forget about permanent hires. With advancements in technology, you have many apps to help complete tasks such as sales management or even invoicing.
On the other hand, if you need someone to curate your company blog or build your business app, you can hire someone from sites such as Guru or Upwork. The gig economy is growing, and you can find a freelancer for almost any job you need to have done–including social media management or a virtual assistant. This way, you don’t have to jump through the hurdles of hiring and/or firing someone.
Save time and money with the right software
Small business owners understand what it’s like to juggle multiple tasks at once. It’s difficult to focus on marketing when you need to invoice your clients, and vice-versa. You’ve probably also watched your competitors and wondered how they found the time to do it all.
Need more time on your hands? One way to do this is to invest in software applications which can help take care of tasks for you so that you can focus on building up your client base, and your revenue.
To illustrate, you must have a social media presence in order to successfully market your business. But, who has time to post to Twitter or Facebook all day long? Instead, you can use applications such as Hootsuite or Sprout Social to pre-schedule your posts. If you need help with accounting and invoicing, you might try apps such as QuickBooks or Xero.
For managing projects and freelancers, there are free and effective project management apps such as Trello. With the wide swath of business apps available today, both free and paid versions, you don’t have to figure everything out on your own. For documents and more, use free Google apps such as Google Docs, Drive, Gmail, Sheets and Calendar.
Save money on utilities
Even if you work from a home office, heating and air conditioning can eat away at your business expenses. Yet, these types of costs aren’t negotiable. Try holding a client meeting in 100-degree weather or freezing temperatures. If you do have an office space, even small changes in the temperature can decrease employee productivity and customer comfort.
What you can do is use a programmable and smart thermostat such as Nest. This will learn your climate preferences, review your building’s energy profile and automatically adjust to the most efficient and comfortable temperature for you. According to Nest, users save an average of $131 to $145 each.
Try a coworking space
Trending in the business and startup world are coworking spaces, which allow you to rent office or desk space on a monthly, quarterly or yearly basis. You don’t have to worry about credit checks or leasing agreements. Many major cities have coworking spaces, and the industry is growing quickly.
When you’re first starting out, sometimes all you need is a desk. In addition, many coworking spaces offer services such as a receptionist, mailboxes, meeting rooms, a break room and more. If you need to increase your space, you can easily and quickly upgrade.
Collaborate with other small business owners to pool resources
You can save on the costs of purchasing supplies, equipment and inventory through:
- Buying groups–These can negotiate better pricing.
- Cooperatives–Common in the agriculture industry.
- Partner networks–American Express OPEN offers cardholders discounts on purchases with national brands such as FedEx and Hertz
- Local business networks–You might get member discounts.
Lower IT infrastructure costs
We live in a digital world run by algorithms. You simply can’t manage a business without a computer. Yet, purchasing and maintaining your own in-house IT infrastructure can be expensive. The same is true for storing your data. This is why cloud storage is booming, as well as infrastructure-as-a-service (Iaas).
Within an Iaas configuration, your service provider maintains the hardware, all you have to do is pay a monthly subscription fee. This is also how cloud storage works. Instead of spending time figuring out what types of hardware and storage you need, hand it off to an expert and reputable firm.
Cut down on travel expenses
Since we do live in a digitally-connected world, there isn’t as great a need for in-person meetings. Travel costs can place a huge burden on your operational expenses. Instead of meeting face-to-face, you can use applications such as Cisco WebEx or even Skype to conduct meetings, webinars and presentations. In fact, there are many free video conferencing tools you can use to cut down on travel costs.
Buy refurbished or gently used
Purchasing items such as laptops, tablets and smartphones can get costly very quickly. You can save some money by purchasing refurbished or gently used items. Refurbished means the equipment has been restored to factory defaults and are often covered by warranties. You can save several hundred or thousands of dollars if you purchase only refurbished items.
There isn’t a one-size-fits-all approach to cutting costs for your small business. You can modify this list, based on your needs. What’s important to keep in mind is as you streamline and manage your expenses more efficiently, you get to keep more of your profits.