Big businesses might get the majority of the attention in the news or from the media. But it’s small businesses that power the American economy. There are more than 30 million small businesses in the U.S. Those small businesses employ nearly half of all American workers and have helped to create almost 2 million new jobs.
Although things look bright for small businesses, company owners do face challenges. One challenge most commonly cited by business owners is the ability to maintain financial growth. Nearly 60 percent of businesses stated that financial concerns were a critical or major challenge to their ability to grow over the next few years.
Reducing costs in a small business is one way to help your company grow and thrive in the years to come. Cutting expenses doesn’t have to mean making considerable sacrifices or operating under austere conditions. In many ways, reducing business expenses means finding ways to think outside the box and finding new ways to approach familiar situations.
Cutting Costs for Your Small Business
When it comes to finding ways to reduce business expenses, it helps to look at cutting costs in a few different categories. Reducing major, recurring expenses, such as your rent and staffing costs, can make a considerable dent in your overall costs. At the same time, finding ways to reduce smaller or less significant costs might not seem to make much of a difference. But added together, trimming those smaller costs can also help to reduce your spending considerably. Here are a few ideas to help you get started.
1. Create a Budget
On its own, a business budget isn’t a way to reduce expenses. But before you can figure how to reduce small business costs, you need to have a grasp of what those costs are. Creating a budget for your business will help you sort out and identify all of your regular expenses. It will also give you the opportunity to note any less frequently occurring costs or any “surprise” expenses that you might not have accounted for previously.
With a business budget, you can see how much income and revenue your company brings in each month, quarter or year. You can compare your revenue to your expenses to confirm that you’re earning more than you’re spending. Comparing your revenue and costs over time lets you see if your company is growing or not. It also enables you to see if you are spending too much compared to your income, reducing your overall profits.
Once you’ve put together a budget, you can begin to zero in on specific expenses and explore ways to lower them as needed.
2. Use New Technology
A world full of apps, online programs and low-cost hardware solutions is a world full of opportunities to save money. Nowadays, tasks and systems that once had to be done by hand can now be automated. For instance, instead of having employees track their hours worked, your business can use time tracking software that records working hours automatically and then tallies up the amount owed to each employee on payday.
Apps that are part of the sharing economy can also help your business save money. Ride-sharing services can often be less expensive and less time-consuming than calling a traditional taxi or limousine company when your employees need transportation.
Another way that technology can help to cut your business costs is by transforming how you store data. You can store files and documents in the cloud rather than on a computer’s hard drive, USB key or another physical disk. Cloud-based storage means that your data is kept on a remote server, located somewhere off-site.
Along with reducing your company’s costs by reducing the need for storage hardware, there are other benefits to switching to cloud-based storage. Instead of being dependent on one machine or on making sure you always have the right disk on you, you can access documents and other files stored in the cloud from any machine that can connect to the internet.
3. Switch Phone Systems
The phone system your company uses can have a considerable effect on its bottom line and overall expenses. Often, it’s common for companies to get a traditional landline phone system when they first get started, even if they also have mobile phones.
While landline phones do have some advantages, such as continuing to work when the power is out, they also tend to be more costly than other available options.
One lower cost option your business might consider is a voice-over-internet-protocol (VoIP) phone system. VoIP phones make and receive calls just like regular landlines.
The major difference is how the information is transmitted. Landline phone connections travel over copper wires. Meanwhile, VoIP connections are made over the internet. The call information doesn’t move over wiring but is instead transformed into a digital signal.
Due to the way VoIP calls are transmitted, they aren’t dependent on a physical telephone or physical connection. You can set up a VoIP phone to ring on a handset in your office as well as on your mobile phone. With a VoIP system, you and your employees can make and receive calls from pretty much anywhere, while still using your company’s main phone number.
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Another way that changing phone system can help to reduce business expenses is by improving scalability. Both VoIP and landline phone systems allow you to have multiple lines. Since landline phone lines are physical connections, if your company grows and you want to add a connection or two later, you need to ask the phone company to come out to your office and install the physical lines. With a VoIP system, you have access to a nearly infinite number of phone lines, without the need to physically connect them.
4. Go Paperless
Going paperless saves your business money in multiple ways. First of all, it helps cut costs by reducing the amount of paper and ink you need to purchase. It can also save on equipment costs, as your company needs fewer printers and copiers when it reduces paper use. On average, a business that cuts out paper can save about $80 per employee annually.
Cutting out paper also helps you reduce postage costs. When you email invoices and other documents to clients and customers, you don’t have to pay for stamps, envelopes or shipping costs.
When your company goes paperless, it also saves on storage space and on the need to purchase furniture for storing documents. When you don’t have row upon row of filing cabinets cluttering up your office space, you can use that space for income-generating activities. Plus, if you’ve rented out a separate, off-site location for document storage, not having to use that space can further cut your business costs.
Going paperless can also be a time-saver. How many times has someone at your company spent hours looking for a document that was misfiled or that got swept up in a pile of other papers? When you store your paperwork in the cloud, you can easily search for it and find it. Once you’ve tracked down the document you need, you can use the search feature on your browser or word processor to find the information you need quickly.
5. Reduce Your Rent
Renting office space or other property can often be a significant business expense. In Harrisburg, Pa., for example, the average cost to rent office space is $15.42 per square foot per year. In Baltimore, Md., the average cost to rent office space is $18.78 per square foot per year.
You might be able to reduce your rent expenses by moving to a less expensive area, whether that means moving to a new neighborhood or relocating to a new city. Another way to cut rental costs is to reduce the amount of space you need. You can encourage more employees to work from home or transform your company into one that is entirely remote. For those times when you do need to meet in person or hold conferences, you can consider renting out space in a co-working space.
6. Rethink Your Software Needs
When you are trying to cut business costs, consider if you need all the software you currently have or if you can get a similar software program at a lower cost or even for free.
While certain brand-name software programs are happy to charge your company hundreds or thousands of dollars a month in licensing and use fees, there are often free or reduced cost versions available. Open source software programs usually offer the same functions and performance as closed source programs but for a significantly lower price.
Along with considering alternatives to high-priced software, it’s worth weighing the pros and cons of using specific programs in the first place. For example, your business might not have a real need for a photo editing program if you don’t often need to use or edit images.
7. Avoid or Reduce Waste
Few things can be more frustrating than waste for business owners. In many ways, wasting supplies and materials is the equivalent of throwing money in the trash. Small businesses can tackle waste in multiple ways, depending on the source.
If your company isn’t going entirely paper-free, one way to cut back on waste is to pay close attention to what you are printing. Only print when necessary to reduce the amount of paper you use. It’s also a good idea to print on both sides of the sheet.
When you do have to print something, consider repurposing it instead of throwing it out or recycling it when you are finished. If you don’t print on both sides and if the document isn’t confidential, you can use the blank side of the paper as a scratchpad for notes and thoughts.
Another way to reduce waste at your business is to evaluate the number of single-use products your company uses. Instead of stocking the break room or kitchen with paper plates, paper napkins and disposable cutlery, purchase real plates and silverware.
You might consider hiring a linen service to supply fresh cloth napkins and towels each week. To cut down on the number of throw-away cups used, encourage employees to bring in their own mugs for coffee and tea and to use refillable glass water bottles.
It’s also worth investigating waste in your inventory. How much of your stock ends up thrown away or unsold? Unsold products and inventory can really hurt your bottom line, as you’re paying for items that get put in the trash. One way to avoid waste when it comes to the items you sell is to stock fewer of them. You can always order more when you run out.
8. Increase Your Energy Efficiency
If your company’s energy bills are higher than you’d like them to be, there are ways to cut those costs. Reducing energy use involves switching to more energy efficient options and convincing your employees to change certain habits.
For example, if your team is in the habit of leaving computers and other equipment on all the time, remind them to power down before they head home at the end of the workday. You can also put small reminders by light switches to get people to turn lights off when they leave an empty room.
When it’s time to upgrade your office equipment, pay close attention to how much energy appliances, equipment and other devices use. Look for ENERGY STAR models to save on electricity and other costs.
Your business has something to offer, other people’s companies also have things to offer. One way to save money is to barter with others in exchange for goods and services. For example, an accounting firm can offer a few hours of accounting advice in exchange for having a painter paint the walls of its office or in exchange for a few hours of legal advice.
Before you try bartering with another company or with an individual, it’s worth assessing whether doing so will help you save money. For example, if you usually charge $200 per hour for accounting consulting, you want to make sure that the service or product you receive in exchange will be worth the same or slightly more than the service you are providing.
10. Reduce Staffing Costs
Staffing often accounts for a considerable amount of a company’s budget. Unless you are a sole proprietor, you are going to need to get creative when it comes to reducing staffing costs.
Fortunately, there are several ways to lower the expense of hiring people to work for your business. You can hire workers on a part-time basis so that you only pay them for the hours they work and don’t have to pay for benefits such as retirement or health insurance. Another option is to outsource certain tasks to freelancers or consultants. When you work with contractors and freelancers, your business isn’t responsible for Medicare and Social Security taxes, which can help to lower your costs.
It might also be worth re-assessing the benefits you offer full-time employees. Can you reduce the amount of paid time off you provide or find a lower cost healthcare plan?
You can also examine the perks you offer at the workplace to help lower your costs. For example, instead of a coffee maker with single-use pods, it might be more cost effective to have a drip coffee maker in the break room, so that employees can make a large, multi-serving pot of coffee at once.
DenMark Business Solutions Can Help You Reduce Expenses
If your business is located in York, Lancaster or Harrisburg, Pa., or in Baltimore, Md., and you’re looking for ways to reduce your expenses, DenMark Business Solutions, Inc. can help. We are a consulting firm that specializes in working with companies to help them control their telecommunications costs. We can perform a telecom audit to help you identify areas where you can save money.
Contact us today to learn more about how your business can reduce its telecom expenses.