How To Reduce Your Business Expenses
Cost-cutting is a good business practice, and cutting in the right areas builds strength. However, cutting in the wrong places could lead to failure.
Cost-cutting should be implemented during bad times as well as good times. It’s a skill you need to practice regularly as a business owner.
The key to successful cost-cutting is cutting in the right places without the cuts affecting your business operation.
Cost-cutting is a good business exercise and good business practice.
Also worth noting, consistent cost-cutting keeps your business secure and your profits up.
My List of The 10 Places To Cut Costs In Your Small Business:
1. Cut Costs in Services That You Use
Services that you use for your business are always a source of cost-cutting. You don’t have to eliminate the service, but you can downgrade the service or switch providers.
Sometimes you have a service that costs you more money but doesn’t deliver the value. For example, I had a dedicated web server for this site. It was costing me around $250 per month. Although it was the best service I could find, it was overkill for what I needed.
I looked for a different service that met my needs, and it was $49 per month. That’s $201 in savings every month, by downgrading one service.
2. Eliminate Unused Memberships
You may have memberships that you use on a monthly or yearly basis. Ask yourself how these memberships contribute to your business success. Would your business suffer if you cancel them? If not, cancel them.
3. Eliminate Subscriptions
If you subscribe to trade magazines, you need to determine how they are helping you run your business. You also have to decide whether you’re reading them. If you’re not reading them and saying that someday you will, then that’s a sign that you need to cancel those subscriptions.
4. Cost Cutting in Job Areas
I’m not one who believes in job cuts, but when you have to make these types of cuts to save your business, it’s better to cut jobs than to go bankrupt, which results in unemployment for all your employees.
If you have an employee that’s doing a job that isn’t really necessary or benefiting your business, then maybe it’s time to consider letting that person go. As hard as that may be, you will have to determine if that’s what you need to do to save your business.
One way around eliminating jobs is to try and negotiate a pay cut. Some people would instead take a pay cut than lose their job.
5. Reduce Energy Use
You can reduce your energy use by turning off lights and equipment that is not in use. Get a thermostat with a timer that will adjust the temperature during times no one is around and therefore save on energy bills. Furthermore, turn off computers at night if they are idle.
6. Evaluate Your Advertising Costs
Advertising can be an expensive part of any business. Done right, it can bring in revenue and keep your business going strong. On the other hand, when you advertise blindly, you could be running up huge costs that are hurting your business every time you run an advertising campaign.
You should test every campaign you have to ensure your advertising is increasing revenues. Eliminate all advertising that is not bringing in any income.
7. Eliminate Any Poorly Producing Products/Services
Any product or service that you have that is not contributing to your business should be cut. For example, let’s say you have a computer repair business, and you also have accessories and parts.
Computer parts that you don’t use regularly are costing you money because typically, computer parts deteriorate in value, and having them lying around won’t do your business any good. Furthermore, you have to pay for them, stock them, and keep them in your inventory. On the other hand, if you order a needed part with overnight shipping, this may work out better.
If you are not making a lot of money from the mixed services, then you’re better off eliminating them, because:
- You can focus on the services that make you money.
- You would no longer need to promote those extra services.
- You wouldn’t need resources for the service you eliminated.
- If you do get asked about those services, you could always set up a joint venture deal and have someone else who specializes in that service do the work.
8. Sell off Assets
You may own assets such as land, an office building, or equipment. Assets that are not increasing in value are an excellent place to cut costs because you have to pay taxes on land and empty office spaces. Also, any unused equipment may need maintaining so, review your assets, and sell off anything that you decide is not worth having.
9. Refinance High-Interest Loans
Interest can be a considerable expense. Saving a on interest will make a difference. Even if you keep your payments the same after refinancing, you’ll be paying off more of the principal rather than just paying interest.
10. Cut Rent or Lease Costs
If you are paying high rent in your area, then it may be time to consider moving. But be aware that location is critical. If you can find a cheaper location that will not affect your revenues, then it’s time to start looking.
That’s The Way I See It!