Cutting your business costs is an effective way to improve your bottom line without needing to bring in more revenue. Figuring out how to cut your business costs without affecting your product quality – and impacting your revenue – can seem daunting.
It doesn’t need to be. By implementing a few particular strategies, you shouldn’t have a problem getting around this. While it’s also worth focusing on increasing your revenue, both of these can be done at the same time.
Five particular strategies to reduce your business costs can be highly recommended.
What Are Your Business Costs?
Before diving into how you can reduce them, it’s worth looking into what your top business costs will be. While the specifics vary from company to company, several categories are common across every firm, making them worth focusing on. They include:
- Labor – This takes up as much as 70% of your operating budget.
- Vehicles – Insurance, fuel, repairs, and maintenance can all be notable.
- Supplies – Your employees will need various supplies, such as desks, chairs, pens, etc.
- Utilities – The electricity and similar resources you use.
- Office Space – Whether you buy the office or decide to rent, this will be a notable cost.
- Insurance – Every business is obligated to have workplace insurance, among others.
- Taxes – There’s no escaping this, and your tax obligations could be quite high.
- Moving Abroad – Will moving abroad affect your ability to trade with other countries?
Now that you know what your expenses are, it’s time to figure out how to cut your business costs. Doing so without negatively affecting your product quality and similar areas can seem daunting, but it doesn’t need to be. Five particular strategies can be highly recommended.
How To Cut Your Business Costs: 5 Top Strategies
Labor will be one of your largest business expenses, if not the largest. Figuring out ways to minimize this is vital. Perhaps the most notable is to outsource as many duties as possible. You’d be surprised at how much you can outsource, including:
- Customer Service
- Human Resources
You can even choose to contract research organization to help with any kind of research you need. From scientific research to market research, there are more than a few companies to choose from.
With this approach, you avoid the large costs associated, with this being much more affordable than hiring full-time employees. You’ll also save on costs related to office space, insurance, employee benefits, and other areas.
2. Evaluate Contracts
You’ll already have quite a few contracts in your business. Many of these will be with suppliers. Evaluating these and negotiating whenever possible is recommended, as it’ll lower your recurring costs. Naturally, doing this is more complicated than you could think.
It’s worth waiting until you’ve grown somewhat before trying any negotiations. Once you do, you’ll find you’ve more negotiation power, simply because you’ll be in a position to buy more. You’ll also have developed a relationship with them by this point, making them more open to any negotiations.
It’s also worth doing the same thing for landlords and any other third-parties you’re involved with. While you may only get a small discount off of each, this will add up significantly. The better you are at negotiating, the more likely you are to get a discount.
That’ll be especially true for your cost per unit, which will come down more than you’d think.
3. Hire An Expert
Figuring out company finances can be overwhelming for even the most-informed entrepreneur. Many simply find it too overwhelming and complicated. That makes figuring out cost-cutting methods difficult, if not impossible, especially when you’re trying to find the right measures to implement.
Hiring an expert is more than recommended for this, with an accountant being notable. You could even outsource this to save on costs, as mentioned above. Doing so offers more than a few benefits. They’ll have the expertise needed to properly understand your finances and determine the best cost-cutting initiatives to implement.
They can also help you figure out more revenue generation methods. There’s no reason not to take advantage of this, especially when you outsource it. It’s worth working with them long-term to make sure you reap the most rewards possible and grow your business in a sustainable way.
4. Adopt Technology
Implementing new technology may be an upfront investment, but it’ll reap you significant savings in the future. Automation is one of the more notable strategies you can use when doing so. By implementing this, you remove the need for you or employees to do it, lowering your overall labor costs.
By using a few tools together, you could end up needing fewer employees, thereby eliminating further costs. You could also use virtual technology to make your office fully remote, which removes office-related expenses. You’ll save much more than you’d think, making it more than worth the initial investment.
There are more than a few tools you can use, with many of these having free options. Choosing these could minimize the investment you’ll end up making. They’ll also increase productivity.
5. Get Creative
When you’re figuring out how to cut your business costs, it’s easy to look at other companies and how they did it. That doesn’t mean the strategies they use will be recommended for you, however. Every business is different and has its unique needs. You’ll need to adapt any ideas to your specific company.
Getting creative is a recommended way of doing so. It’s worth getting your team together and brainstorming ideas for this. By adding your employees into the equation, you get different perspectives than your own. That could help you discover and enhance ideas you wouldn’t have thought of.
At the same time, you could brainstorm ideas to increase your revenue. Your bottom line will be much healthier once you do.
How To Cut Your Business Costs: Wrapping Up
Once you know how to cut your business costs the right way, you shouldn’t have a problem doing so without negatively impacting your product quality and other areas. While that could seem like an overwhelming process, it doesn’t need to be. There shouldn’t be anything stopping you.