Managing and cutting costs are key jobs all small businesses face. Economic challenges are set to continue, making it vital your overheads are well managed. In this article, we focus on ways small businesses can cut costs to help them remain a viable business.
10 Ways for Small Businesses to Cut Costs
Start by breaking down costs and organising them into individual key groups such as production, sales and marketing, financing, administration, purchasing and facilities maintenance. Your profit and loss statement is a good document to start with, as you can quickly see where your big spending areas are.
- Buy in bulk – suppliers prefer to sell in bulk because it keeps their costs lower. Consequently, when you purchase in bulk, they’ll likely give you a larger discount per unit. This keeps their costs down because they require smaller storage facilities and less time to prepare to ship. This does mean you need to pay more money up front and store the supplies at your end though.
- Sell unwanted equipment and supplies – if you have equipment you are not using enough to warrant its ownership, or have excess equipment, materials or supplies, consider selling these on. Not only will it bring in some cash, but it will also clear out space and remove any equipment maintenance costs.
- Narrow your business focus – bringing your focus right down small to a highly specific niche area can save you money. Not only do you need to purchase and hold a wide range of stock, you will find it easier marketing to a highly specific audience.
- Check your time use – what are your time consuming tasks? Can they be made any quicker to complete? Which areas are you wasting time in doing, which you would be better off delegating to someone else? Could you use team tracking software or apps which reduce distractions to help staff stay on task? You can set time expectations for completing tasks too.
- Reduce your space – could you move to a smaller office or store? Is having a storefront still viable, or should you simply take your business online only?
- Rent rather than buy equipment – if there is equipment you only use sporadically or at certain times of the year, then consider hiring it as a viable option in reducing your overheads.
- Rein in your outsourcing – are there tasks you are currently outsourcing that would be cost effective to do inhouse instead? They would have been outsourced in the first place for a reason, so be certain that bringing them back inhouse is the cheaper and most viable option.
- Boost staff productivity – in what ways can you raise the productivity levels of your team? Team building courses? Changing rosters? Reorganising employee tasks and expectations? Offering a commission?
- Conduct a tech audit – go through your licenses and subscriptions, because there is likely some repeating costs can be culled.
- Reduce spending – is it really necessary to use the expensive coffee machine at work that uses only costly coffee packets? Do you really need to pay for a mobile phone for all staff, or could some only use the main line? What about instead of hiring a caterer for events, everyone instead is encouraged to bring a plate?