Archive for July 29th, 2011

8 Ways to Reduce the Cost of Your Small Business

July 29th, 2011

 

Cutting costs can be a great way to increase profitability, or to afford the assets essential for growing your business. The problem is, when you’re running a small business things are usually happening so quickly that you can’t take the time to analyze your spending and determine if you are really acting as wisely as you think. However, it’s more likely that a small business will experience a noticeable increase in profit due to a series of small cost-cutting strategies rather than by the acquisition of a new client.

Cost cutting strategies don’t have to be complicated; they just require that you pay attention to some of the more mundane aspects of your business.

1. Make a Budget and Stick to It
Budgeting is an inseparable component of reducing business expenses. When you don’t know exactly where the money is coming from and going to each month, you cannot make smart and effective financial decisions. A proper budget for your business is a powerful tool to reduce business costs.

2. Make Better Use of Technology
Technology can turn out to be a real money saver and can advance your business in many ways. Technologies like teleconferencing services, online payment services, open-source software and remote desktop applications make a great contribution in reducing small business costs.

For example, consider remote applications such as using the fully compatible Google Docs instead of Microsoft Office. It’s a small move that will dramatically improve efficiency. You can access Docs from anywhere and from any device. Sharing documents is much easier, so collaboration becomes even more efficient. Depending on how many employees you have, this can cut thousands of dollars or more out of your annual software expenses.

3. Shipping & Delivery Services
Shop for the best deal on your shipping and delivery services. As the amount of items you dispatch increases, ask for rate reductions from your shipping company. If they won’t reduce your rates, offer your business to other shipping companies. Shipping is very competitive and there are always rate saving deals to be made.

4. Product Stock and Business Supplies
Continually research the prices you pay for the product stock you sell to customers and the supplies you need to operate your business. Don’t compromise on quality, but keep an eye out for similar, or the same, products at lower cost. As the amount of business you do increases, ask your suppliers for discounts. Plus, ask your regular suppliers for other similar products that could satisfy your customer demand but at a lower cost. You may just stumble upon a new fast moving product line.

Whenever possible buy in bulk, not only for your product stock, but also for the items that your business uses on a continuous basis. A good way to do this is to observe which office supplies you always seem to be running out of. Shop around for the most attractive price. When you buy large amounts at once, you will usually get much larger discounts.

5. Embrace the Paperless Office
Businesses often overlook the expense incurred by having hard-copy documents. If you could reduce, even by half, the amount of paper, ink, mailing supplies, postage, etc., that your business consumes, it would surely be a noticeable amount. You don’t have to go completely paperless, and probably can’t as there are always some records and other documents that must exist in the physical world. But most need not. Surely you are already sending all your invoices by email, and the ones you receive probably don’t need to be printed out. Almost all important paperwork can be kept in digital format and stored on a computer rather than in a filing cabinet 

6. Promote Your Business Online
You are probably already marketing your business online, as that has become a crucial component in attracting customers. You’ve been building your brand and establishing your presence on the Internet ever since you set up your company website, but you need to keep going in that direction. Your money is better spent on starting a business blog, leveraging your social media properties and advertising with the appropriate online sites and tools, as opposed to the old print media methods. This will invite quick responses from new and established customers at a lower cost and a higher volume per dollar spent.

7. Premises
Your premises may be one of your most expensive overhead items. If you are just starting out, don’t lease a place of business until it’s absolutely necessary. If you can work from home, continue to do so for as long as possible. You already pay the various utilities at home, so running your business there will only increase these bills by a small percentage. Don’t add rent or mortgage payments to your expenses until it makes proper business sense. Even then, try to find a facility that minimizes your cost exposure by perhaps renting some of the space to another business or looking for a location where you may pick up some passing retail trade.

Business places are often expensive but, in many cases, you can reduce these costs to a great extent. By looking for a co-working arrangement, a sub-lease, a temporary office or temporary storage site for product inventory, or by setting-up a home office, you can reduce the cost of your premises.

8. Get an Accountant
Save money in every way possible but keep in mind that a good accountant will save you the money you pay many times over. Good businesses fail on the back of poor advice. Good businesspeople are cleaned out and demoralized by the unforgiving tax man, also due to the lack of good advice.

Even if you don’t have your accountant doing all your bookkeeping and compliance work, you should still have up-to-date information at all times. So when establishing a business use software from the start, and if you can get into the practice of recording every transaction more or less as it happens, you won’t wind up with a backlog of work to complete. The information your system provides can be used by your accountant to give you the analysis and reporting you need to make good business decisions, and should in-turn reduce your annual expense.

The Bottom Line
It’s impossible to run a business without some overhead. But these costs can be minimized or eliminated in many cases, leaving you with more profit in your pocket. The cost savings process may seem obvious, but even the best organized among us forget, or put off, our cost saving procedures. However, continually analyzing and reducing costs will not only dramatically increase the chances of your business succeeding but, if implemented on an already successful business, they will seriously increase profits.