If you own a business, one of your main priorities is probably making money – and, with a small business – every penny counts! You will undoubtedly have expenses, lots of them. And, in a world with endless opportunities, distractions, and shiny new toys – it’s easy to get caught up in a never ending cycle of increased spending. A crucial part of running any business is keeping tabs on spending, understanding your expenses, and identifying ways to cut costs.
Let’s start at the beginning – What are expenses? Expenses can come as either cost of goods sold (things you purchase that go towards the cost of creating what you are selling) or operating expenses (things that keep the business running – like payroll, technology, and utility bills). Each of these groups can add up to big dollars and impact your cash-flow, so it’s important to keep an eye on both.
Did you know that over 80% of businesses fail because of cash flow problems? 😬 In order to grow your business, limiting expenses and cutting costs is crucial to keeping your bottom line intact. The sweet spot is to continuously cut what you don’t need while preserving what you do. This can be tricky – but here are some sure fire ways to get you on the right path.
Before you can reduce your expenses, you must know and understand your expenses. Review your income and costs and create a budget. Make it a habit to review your budget and expenses on a monthly basis. Look for trends. If you see that you’re continuously over budget in certain areas, there may be opportunities to cut costs there.
Like with any area of your life, spending can sometimes get carried away. New opportunities or cool gadgets that you think will drastically change your life…but in order to cut your costs – you need to be diligent with what you’re spending your money on. When you’re reviewing your bank statements, think about things that you may not need. Add them all up at the end of the month – visually seeing how much you could have saved will be 👀. Look for repeat offenders in your spending and make a conscious effort to minimize those expenses – or better – cut them out all together!
Do you buy in bulk? Do you pay a premium for quality supplies for your products? Do you use a lot of different vendors? If you don’t buy in bulk, think about switching. If you already buy in bulk, negotiate with the vendor to get a discount – you could be missing out on savings on each product you sell!
Review and compare prices for different vendors on a regular basis. If you like the quality of the supplies you’re currently getting but not the price, see if the vendor will price match against a competitor, or give a discounted rate to stay.
Insurance and banking are essential for most businesses – but there are a lot of options to choose from. Understand the insurance you have, and do price comparisons on a regular basis. Change insurance providers if they have a lower cost, or work with your provider to meet the lower cost. They are pretty willing to lower their cost to maintain the relationship.
Same with banks – are they charging you fees? Are the fees from when you first joined the bank? Evaluate what fees you are paying your bank – you may be able to get those eliminated. Banks want your business too (and they know they are a dime a dozen)! Or – think about switching banks. Regional banks usually have less fees and better loan options than national banks. Shop around!
Are you spending WAY too much on marketing? Is it eating up your budget? Think about utilizing social media and online marketing instead. Of course – if your marketing and advertising strategy is working, you don’t want to abandon it – but, social media is a great way to get your name out there for minimal cost. (You can even work with us to help get your social media off the ground and set up for success!!)
Build an email list or a CRM program. Referral incentives. All done online and minimal cost. Developing an online marketing presence you can expand your network and develop a brand identity that speaks to the customers you want – at little to no cost!
Time really is money – so spend your time wisely. And – make sure your team is spending it wisely too! Minimize distractions during your working hours and it will save you time, and lots of money! Research tools like Motion for time management or Connecteam to evaluate your team’s time. Understanding where time is being spent and how that time impacts revenue and costs is very valuable in improving your top and bottom line.
Are you spending a lot of time on products or services that are not that profitable? Evaluate the cost margin of those products when factoring in the time it takes to get those into the consumer's hands. You may find if you eliminate those low-margin items, you can put more energy in your bigger money makers, reduce your costs, and bring in more revenue!
One of the biggest expenses any company faces is payroll. Before you make the jump to hiring more team members, make sure you do a thorough review of the responsibilities and workload of your current staff. You may find that there is room in their current day to add more responsibilities. Or – you have the staff members focusing on areas that are not in their skill-set, taking them longer to get the job done. Switching around tasks may improve their efficiency and the need for additional workers.
Or – instead of doing a full-time hire, consider subcontracting or hiring contract employees to reduce hiring costs and the costs that come along with full-time employees (like health benefits).
I know what you’re thinking – paper isn’t expensive. But – think about all the things that come along with paper… ink, pens, pencils, postage, physical space, time. By eliminating traditional paper, you eliminate a lot of other office supplies that can add up pretty quickly.
By eliminating paper, you are eliminating a lot of mail too. By switching to a digital footprint, you can send your invoices and contracts online, and save a lot on postage! And, when you have all of your necessary documents in an online space, you don’t need physical storage, taking up less space. By having everything online, you save time by not having to file and mail all of those documents as well – and time is money!
There are many apps and tools available to help move your business to an online space. Tools can help you organize your documents, like the Google Office Suite, to time tracking, accounting and invoicing, project management, video conferencing, and more. All of these automated technologies can help save you time and money.
Think about going completely virtual and reduce or eliminate the cost of a physical space. With today’s technology many employees can do their job effectively from home, reducing your physical cost tremendously. Think about some of these products to help you with your virtual presence.
Zoom (video conferencing)
Connecteam (team management)
If you still need help cutting costs, there are always experts to turn to. An expert, someone who is a CPA, bookkeeper, or financial business expert, can help you to develop a full cost-cutting strategy to help with those challenging decisions.
Before you start slashing your expenses with a permanent red marker – take a deep breath and remember some valuable key advice.
Evaluating your expenses and cutting costs can make a big impact on your business. No matter how well your business is doing, reducing costs should always be in the back of your mind. These tips will help you be on a better path in no time!
Spending money on your business can feel like a never ending battle. Expenses can come in a variety of ways, and the main types of costs are Cost of Goods Sold or Operational Costs – both can expand so much that it tanks your profit margins. There are ways to cut those costs, but one of the biggest ones is to evaluate your budget and expenses often to see trends, and make knowledgeable spending decisions. Other ways include modernizing your marketing, narrowing your focus, going paperless, and streamlining your tech! If you still need more help – hire an expert to develop a strategy for you. Cutting costs can be stressful, but take a deep breath and take it step by step – even small changes can make a BIG difference!
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