If you’re a business owner, you’re probably well aware of the statistics. 20% of small businesses will fail within their first year, 30% in their second year, and 50% after five years.
The reason why so many businesses fail? Problems with cash flow. That’s why it’s so important to achieve a lower cost for your business. Read on to learn the best ways to do this.
Even the smallest reduction in expenses can have a massive impact on the profitability and long-term survival of your business. Here are nine of the best ways to reduce your business expenses:
1. Reduce Utility Costs
Utilities and overhead can easily be reduced without negatively impacting customers and employees.
Use a smart or programmable thermostat to massively cut your costs for climate control without impacting comfort. This will mean that the office will be cool during work hours, but you won’t need to pay for heating or cooling during the night.
Other good options include installing double-pane windows and blocking light with curtains and blinds. You should also always turn off nonessential machinery, appliances, and lights after hours.
2. Focus on Supply Costs
Every penny you can save on wholesale supply costs is worthwhile. Getting the best deal possible can massively impact your bottom line, which means you need to constantly monitor costs. Look for deals and discounts, and consider negotiating.
If you notice that a competitor can offer you a better deal, be sure to ask your current supplier to match it. Otherwise, switching can be worthwhile.
3. Slash Advertising Costs
If you’re still using old-school advertising, now may be the time to look at more modern (and cheaper) options. These days, taking out an ad in the paper is not just expensive, but it’s also not the best return on investment.
Look at ways to build a loyal online following on social media. Give potential and current customers incentives to sign up for your email list, and encourage referrals whenever possible.
4. Consider Telecommuting
Telecommuting has massively cut costs for millions of employers, however many are still reluctant to tap into the potential of telecommuting.
Telecommuting has a huge impact on employee job satisfaction and morale, which also improves productivity. You’re also more likely to have access to top talent when you tell potential employees about your flexible, work-from-home options.
You’ll reduce utility costs, rent, and will also save time lost to travel and commuting.
5. Control Your Billing
Billing can be surprisingly expensive and time-consuming for many companies, which is why this service can be a good option.
Did you know that some vendors will offer small discounts if you pay your invoices ahead of schedule? If this won’t impact your cash flow, these types of options can make good financial sense- but it also means that your billing team needs to be able to handle different dates for invoices instead of just paying everything at the end of the month.
There are plenty of options for software which can track and analyze your business expenses and purchases, making it easier for you to keep a positive cash flow, understand your taxes, and more.
6. Encourage Smart Time Management
Whether you have two employees or two thousand, it’s a good idea to encourage time management and disincentivize procrastination.
We all know that wasted time means that you’ve wasted money. The best way to manage this is to implement systems that will hold all of your employees accountable, like time-tracking software.
There are some great project management apps such as Basecamp which can help, as can tools like Slack which can allow for easier and more effective collaboration.
7. Use Contract Labor and Freelancers
If you have projects coming up but don’t necessarily need to employ a traditional employee, independent contractors and freelancers can be a good option.
These are cheaper and easier to hire for many businesses, provided you are both on the same page when it comes to the responsibilities and deadlines. You won’t need to provide freelancers with family leave, pre-tax retirement accounts, paid time off, or health insurance benefits.
Keep in mind that freelancers will have other clients, so won’t be 100% focused on the needs of your company. However, they can be an excellent option for one-off projects or a certain amount of hours each week.
8. Check Your Insurance
Insurance rates and coverage can change each year depending on market performance and industry trends. That’s why it’s smart to re-evaluate your insurance annually to make sure you’re getting the best protection for the best price.
If you’re simply allowing your insurance to renew automatically each year, it’s likely that you’re paying more than you need to. Many carriers will offer discounts if you’re purchasing multiple policies at once. For example, you could bundle commercial property insurance and general liability coverage to get a great rate.
9. Only Pay for What You Need
It’s easy to commit to leasing or buying expensive equipment when you first start your business or when times are particularly good. However, you may not actually need all of this equipment.
Take some time to analyze what you’re paying for, and sell what you don’t need. Often, you can rent certain equipment for a day or two for far less than what it would cost to purchase and maintain it.
The same is true for leased equipment. If you don’t absolutely need it, see if you can renegotiate your payments or even cancel the lease.
Ready to Achieve a Lower Cost of Business?
As you can see, there are plenty of ways to achieve a lower cost of running a business and ensure that you’re not trickling money away every day.
Some of these changes may seem small, but multiple small changes can add up to big savings. They also get you into the habit of analyzing each expense to see if you actually can justify it. And that’s simply good business.
Taking action now will make it more likely that you’ll be one of the businesses that are still succeeding in five years.
Need more money-related advice? Take a look at some of our many other helpful financial blog posts.