When the economy is relatively unstable, every dollar counts. You’ll want to have some savings tucked away so that there’s a cushion to land on in case the business falls on hard times.
If your company already has some savings, great! But if you have put this off for a long time to pursue other agendas, now’s the time to start building up an emergency fund. The good news is that you don’t necessarily have to get it from company profits. Instead, you can find ways to reduce business costs.
Don’t know where to start? We’ve got you! We’ve listed proven effective ways that companies of all sizes have reduced business costs. Try these out to see what you can apply to your enterprise:
Retain More of Your Business Assets
What we’ve found is that a lot of business owners tend to accept many things as losses when they can still be useful. They feel that because the asset has fulfilled its purpose, getting rid of it isn’t an issue.
But what these owners don’t realize is that they’re losing out on any potential future value that these assets may still have. As much as possible, you’ll want to prolong their lifespan. This helps you save by potentially avoiding the purchase of newer products. In some cases, it can help you retain the outcome from past investments.
It doesn’t matter how big or small the asset is. Remember, every dollar counts. If you’re not sure how to implement this, these ideas might help you get started:
- Tell your phone provider, “Port my vanity number”. A vanity number is more expensive than a regular one. So, if you’re switching providers, you’ll want to keep it. Not only does it let you retain increased brand recognition because of the number, but it will also prevent confusion on the part of your loyal customers. Besides, who wants to spend all that money and effort to purchase and market a new vanity number?
- Reuse even the little things. Even though you’re not banking on the environmentally conscious market to boost sales, it’s still a good idea to reuse what you can. For example, old furniture may be used for a unique art installation.
- Improve employee retention. The whole process of recruitment and onboarding takes a lot of time and resources. And if you’re in a hurry to hire someone, you’ll have to attract more candidates with even more competitive salaries. Accounting for labor costs as well as time and productivity lost, it’s cheaper and more efficient to keep your current employees happy.
There are more ways to retain assets, but we hope you see that by assets, we’re talking about anything and everything that contributes to generating profit.
Always Try to Get a Good Deal
No matter how big your company gets, the world will always be one giant flea market. Everything is there for you to examine and inspect, but most of it will not be a good fit. Most importantly, however, everything is negotiable.
If your business has been around for some time, you most likely have already established a decent credit history. You have probably also gained a lot of valuable assets that can serve as collateral.
All your hard work shouldn’t just be visible on paper. Without using the assets themselves, you can still leverage them. Think of it as how credit ratings work. The higher your score, the lower the interest rate that you get for loans. If you have a good payment history with your creditors, you’ll be in a position to shop around for the best rates, helping you save money on monthly payments.
If you’re getting certain items from a supplier and have built a good relationship with them, you may want to ask for a discount. Bringing in significant orders to their business is a good way to have more sway on whether they’ll accommodate your request for a discount.
But even if you’re just starting out or have had cash flow issues in the past, why not just ask anyway? After all, you really don’t have anything to lose by trying to get a better deal. The worst that they can do is decline your request.
The internet age has been around for quite some time now. And during this period, various software and technological tools have become cheaper, becoming even more accessible to the public. There are many advantages associated with embracing the use of digital tools for your business, such as:
- Reduced chances of human error
- Improved productivity and efficiency
- Better management of resources
- More convenient resource accessibility
- Improved resilience
- Greater customer satisfaction
Even on their own, all of these are great selling points! All business owners want these benefits, so even without the cost-cutting angle, there’s enough reason to go digital.
But did you know that creating a digital workplace can also help you save money? Most of the advantages mentioned above help you get a better return on investment. This means that without increasing your spending, you’re getting better output (and profit).
For example, transferring a lot of business documents online is a great way to save space. Those things might be taking up a lot of room already, so by digitizing them; you’ll be able to transfer to a smaller office space. Are you regularly sending paper mail to your clients? Give them the option of receiving everything electronically instead.
So, if you want to take your company to the next level, it might not take some genius innovation to do it. All it might take is some digitizing of the workplace.
Cut Production Costs
When talking about cutting production costs, people usually think it has something to do with using lower-quality materials. But this isn’t the only way that production costs can be minimized.
With production, not a hundred percent of all raw materials will be transformed into the finished product. There will always be wastage resulting from production processes, but that doesn’t mean there’s no value in them.
If you just get rid of all paper, metal, and cardboard after getting the finished product, why not sell it instead? Perhaps you won’t get a lot relative to the cost of production. But in doing so, you’re still effectively lowering business costs.
Are you in a business that doesn’t produce a physical good to generate profit? Instead of looking at business production within its strict definition of transforming raw materials into a product that has more value, try to see how it applies to your business model.
Let’s say that you’re in the real estate industry. Even though you’re not creating an actual product, you still have business essentials like office space to lend legitimacy to your operations. Look into getting rid of clutter or redesigning how the space is used so that the entire operation takes up less square footage. You can rent out the now unused space to lower your spending.
Save Your Resources
Whether you’re trying to cut back or not, it’s important to examine where the money is going and how these company-paid assets are utilized. So, ask yourself, is everything that you’re paying for being used efficiently?
With everything that’s going on, it’s completely normal to overlook things. Perhaps the company signed up for a subscription years ago and has since forgotten. For example, you may have gotten a cable subscription for the break room way before streaming services became a thing. But since it doesn’t cost a lot, everyone just forgot to cancel it.
Or perhaps your needs suddenly changed. Before the pandemic, perhaps all your staff worked on-site. But since then, many have been working from their homes. With many people working remotely, the demand for commercial real estate has dwindled, so you can get the same office for a better price.
What if we told you that you could do better? Although it’s great that you were able to get the same thing for less, perhaps you don’t even need all that space anymore. Therefore, it may be smart to transfer to a smaller space in the same area.
When looking to save resources, you don’t necessarily have to look for big-ticket opportunities. Even small efforts like trying to lower the electric bill can help reduce business costs without compromising productivity. You’ll be surprised just how much you can save by applying the sample principle to everything.
Consider Getting a Freelancer Instead of Hiring a Full-Time Employee
A heavy workload can take a toll on your employees, resulting in lower employee retention and an increase in human error. Not addressing this issue can have disastrous results. So, before that happens, it’s best to get additional labor right away.
If you don’t have funds for full-time staff, don’t worry. There are other work arrangement alternatives that you may consider, such as hiring freelancers. This option can be way cheaper than getting someone full-time, especially if you’ll only be needing them during peak seasons. By getting a freelancer, you won’t be obliged to spend on benefits, training, and other perks that the rest of your staff enjoys.
But before doing this, consider that a freelancer can turn down jobs as well. So don’t make the mistake of thinking that a freelancer, no matter how reliable, will have the same commitment as a full-time employee. If something is considered a one-person job, you may want to have a few additional contacts to go to, just in case.
Isn’t Reducing Business Costs Just the Same as Cutting Corners?
Definitely not. Business cost reduction involves removing resource inefficiencies without negatively affecting the key performance indicators. Like with the tips that we’ve mentioned above, the goal is always to get more for less. In extreme situations where the company suddenly needs to work with a smaller budget, a valid cost-cutting measure will try to limit the effect on the KPIs.
But this is still not the same as cutting corners. In this scenario, you’re cutting costs with no regard for how it will affect the organization. This may be done with little to no regard for KPIs.
For example, laying off marketing employees may reduce labor spending, but it may severely affect the sales generated by the company.
As enticing as it may be to widen the gap between costs and revenues, you should never devalue business assets. Valuable business assets bring in money, and reducing your spending on them may affect your ability to generate income.
The key here is to be observant and creative. We hope that our tips give you some idea of how to reduce business costs effectively. Which do you think may apply to your business? Start a discussion by leaving a comment below.