Do you remember the movie Office Space? In one scene, the main character (played by Jennifer Aniston) is asked by her boss to come up with ideas to save the company money. She comes up with a list of things like “stop buying coffee” and “turn off the lights when you leave the room.” Now imagine if you were in charge of cutting costs for your business. Where would you start?
But before you start making any drastic changes, it’s important to understand that not all costs are created equal. In other words, some business costs are necessary, and others are discretionary. For example, it makes sense to spend money to save money, such as when you invest in energy-efficient office equipment or purchase bulk supplies. So, how do you know which costs to cut and the ones to keep?
Here are a few tips:
- Evaluate your current spending
The first step is to take a close look at your current expenses. This will help you identify areas where you can save money. Next, make a list of all your business expenses, both fixed and variable. Fixed costs, such as rent or mortgage payments, remain the same each month, while variable costs, such as utilities or inventory, can fluctuate.
When you get into the nitty-gritty of your spending, you may be surprised to discover that some of your costs are unnecessary. For example, do you need a large office space to accommodate your team of five employees? Or can you downsize to a smaller space and save on rent? Perhaps, you may also consider opting for a virtual office if you’re business is online or you don’t need a physical space for your operations. You can set up a virtual office in any country without needing a physical space, saving you office-related costs such as rent, internet, and electricity. You can use your virtual office address as your business address and a reliable mail forwarding service to get your physical mail. The plan may include meeting rooms and business lounges whenever you need to hold face-to-face meetings, call handling, or business events in the country of your virtual office.
Once you’ve created a list of all major and minor expenses, you’ll be better positioned to start cutting them down.
- Review your contracts
Another area where you may be able to save money is by reviewing your contracts, both with vendors and customers. For example, are you locked into a long-term contract with a service provider you no longer need? Or are you paying for services you no longer use?
For instance, do you need a landline for your business? If you’re only using your mobile phone for business calls and communication, then there’s no need to keep your landline service, and you can save on that monthly bill. If you’re going digital, review your contracts with stationery and office supplies vendors to remove items you no longer need, such as paper and printing ink.
It’s also important to review your customer contracts to ensure you’re not overpaying for products or services. For example, if you’re a retailer who buys products from a wholesaler, you may get a better price if you predict demand and buy in bulk.
- Invest in technology
Investing in technology can help you save money in the long run, even though it may require an upfront investment. For example, consider investing in a scanner and document-management system if your business relies heavily on documentation. This will help you save on the cost of paper and ink, and you’ll be able to access your documents from any device with an internet connection.
You can also save money using cloud-based applications, such as Google Docs or Dropbox, which allow you to store files online and share them with others. These applications are typically less expensive than their traditional counterparts, such as maintaining a library or store room of outdated paperwork.
- Review your marketing strategy
According to the Small Business Administration, the average small business spends 7 percent of its gross revenue on marketing. However, depending on the industry, that number can be higher or lower. For example, businesses in the retail industry may spend as much as 12 percent of their gross revenue on marketing. In comparison, businesses in the professional services industry may spend as little as 3 percent.
If you want to save money on marketing, it’s important to review your strategy to ensure you’re not spending money on activities that aren’t generating profits. For example, don’t use print advertisements if your customers are mostly online. Instead, you may be able to save money by shifting your budget to digital marketing activities, such as pay-per-click advertising or social media marketing.
Even while choosing the correct digital marketing methods, evaluate your options based on where most of your target audience is. This will help you save money and get better results in marketing endeavors.
- Consider outsourcing
You may be tempted to bolster in-house resources to be self-sufficient when running a business. However, that’s not always the most efficient or cost-effective way to run your business. In some cases, outsourcing certain tasks may be more cost-effective.
For example, you may want to outsource some of your administrative tasks, such as bookkeeping or customer service. This will free your time to focus on more important tasks like branding, marketing, and new product development.
Outsourcing can also help you save money on labor costs. For example, if your business relies heavily on customer service, you may want to outsource that department to a dedicated service. That way, you’ll save on hiring costs, equipment, and rent costs. Again, this can be more cost-effective than hiring a customer service team in-house.
- Negotiate better deals
The art of negotiation is an important skill for any small business owner. After all, you’re always negotiating to get a better price from a supplier or convincing customers to pay on time.
Now, who doesn’t want to save money? So small businesses always look for ways to cut costs and save money. And negotiation is one way to do that.
When you’re negotiating, it’s important to keep your end goal in mind. For example, if you’re trying to get a better price from a supplier, your goal is to pay less for the same product or service. But if you’re trying to get a customer to pay invoices on time, your goal is to get paid sooner rather than later. Remember, the person you’re negotiating with has their own goals, so it’s important to find a middle ground that works for both of you.
As we progress into the 21st century, saving money while running a business in a competitive landscape becomes more difficult. With technology becoming more expensive and the ever-changing landscape of the internet, it can be tough to keep up. Luckily, following these tips can help you cut some corners and save money for a rainy day.