As a business owner, you have to be very aware of your expenses – particularly overhead expenses that have the potential to silently eat away at your revenue. Otherwise, you could fall victim to an eroding profit margin and send your business into a tailspin.
5 Ways to Cut Costs
As cold as it may sound, business will be about dollars and cents. If the math doesn’t work, the business falls apart. There are no exceptions. So while you may have bigger and better goals for your business – goals that focus on helping and serving others – the truth is that you’ll never accomplish any of these objectives without first ironing out the wrinkles in your finances. And this starts with cutting costs.
Intentional cost-cutting is something every business should prioritize to achieve greater cost efficiency and beefier profit margins. Here are a few places to begin:
1. Rethink Office Space and Rent
One of the first suggestions is to rethink how you’re using office space. While many businesses are choosing to downsize by allowing parts of their team to work remotely, this might not be the best option for you. There’s something to be said for continuing to work out of a physical office. It makes communication easier and can actually improve efficiency and output in certain industries.
The best thing you can do is cut the cost of rent (which is probably one of your budget’s biggest expenses). If you’re confident in your ability to negotiate a lower rate, you may call up the building’s landlord and strike a deal. Or, if you’re comfortable making a change, hire a tenant-centric broker and enlist them to find a better rate.
2. Go Paperless
You’re probably well on your way to a paperless office by now, but make this the year that you finally tie up those loose ends and go digital. Between cloud drives, electronic signatures, and improving security features, there isn’t much reason to rely on paper.
You’ll get some savings from no longer having to buy paper/ink cartridges or service your copier machine, but the biggest savings come in the form of increased efficiency and higher output.
3. Keep a Lean Staff
The cost of wages, benefits, and other employment-related administrative expenses are not to be overlooked. They might seem like a fixed cost, but there are ways to cut back.
“Unfortunately the easiest way to reduce administrative expenses in a business downturn is to cut staff, which is painful for both employees and management but often necessary to ensure sustainability of the business,” entrepreneur Susan Ward writes. “Sometimes this can be avoided if employees are willing to job share, switch to part time, or take unpaid leave.”
Outsourcing work to reliable independent contractors is one good option. Good freelancers aren’t cheap, but they don’t require payroll taxes and benefits. (And you only pay them for their output, which makes them plug-and-pay options for busy periods.)
4. Hire an Accountant
While it makes sense to keep a lean staff, hiring an accountant could be the smartest move you make.
At first, hiring an accountant seems counterintuitive to the underlying goal of cutting costs. However, you have to consider that one of an accountant’s primary goals is to save the business money. A good accountant will more than pay for themselves by finding areas to reduce taxes and realign finances.
5. Leverage VoIP
Still using a traditional phone service in your office? It’s time to leave the dark ages and leap into the modern age of Voice Over Internet Protocol (VoIP) technology. VoIP is basically a digital phone service that runs via the internet, as opposed to traditional phone lines. This makes it accessible from anywhere and with nearly any device.
According to reports, businesses that make the switch to VoIP from a traditional setup experience average cost savings of 50 percent.
Adding it All Up
Cost-cutting is a game of incremental and compounding progress. Saving $100 per month on one budgetary line item doesn’t do much. But once you add up all of the savings across the board, you’re left with thousands of dollars of additional profit that can be reinjected into your business to achieve more growth.
Don’t miss out on the opportunity to improve your business and foster greater stability!
Jenna Cyprus is a freelance writer from Renton, WA who is particularly interested in travel, nature, and parenting. Follow her on Twitter.
Cutting costs stock photo by Jirsak/Shutterstock