5 Ways to Cut Down on Costs For Your Small Business
We all know most small businesses in Australia are doing it tough right now.
With the rising cost of living and the lingering effects of the Covid-19 pandemic still very much influencing the buying patterns of customers, it is becoming harder than ever to keep a company afloat.
Faced with these challenges, businesses have naturally started tracking their spending and tightened their financial belts. Looking for as many ways as they can to reduce the costs – and therefore increase the profitability – of their overall operation.
While there are several cost-cutting measures you can adopt, they can roughly be divided into two categories. Those that provide significant savings within a 6-month period and those, like switching utility providers or adopting greener practice, that save money over a much longer timeframe.
Of course, to build a healthier foundation for your company, your strategy should concentrate on both. But to initiate your pursuit of a much better cash flow, we will focus on the former.
With that in mind, here are five ways to cut down costs for your small business. Implement these strategies and it will save you a significant amount within a 6-month period.
1. Cut out unnecessary spending
In the same way, as you might declutter your home, you need to declutter the outgoings of your business.
Unless you know exactly what you are spending money on, it is easy to keep making payments for things you don’t need. Especially if those payments are automated.
Therefore, it is important to go through every single one of your transactions to ascertain what costs you incur on a daily, weekly, monthly and yearly basis.
While this might take a bit of time initially, if you go through every purchase your business made within the last 12 months you will quickly see lots of cost-saving potential.
For instance, can you find a cheaper accountant or business insurance provider? Are you getting the best deals on the computers you need to buy? Are there any cheaper suppliers out there? Do you really need that subscription to The New York Times, CNN or Marketing Week?
This is one of the easiest and most effective ways of making immediate cost savings for your small business. However, it also represents another opportunity to further cut costs too.
By itemising everything your company spends money on you will soon ascertain what is important to your business. This knowledge can then be used to negotiate a cheaper price on something on the proviso you bulk buy it.
If you know you got through one water cooler bottle a week, you can consider buying 50 of them (assuming you have the storage space) at a discounted price. This would save you a tidy sum if you previously ordered it on a weekly or monthly basis.
Likewise, if you know you shift a minimum of 12,000 tins of white paint every year but only order 1000 of them every month, you should consider upping the amount you purchase, if you can get them at a cheaper rate.
2. Cease all paid marketing activities
Another way to make instant savings for your business is to cease all paid marketing activities.
While this might seem counterproductive for small businesses, they can easily haemorrhage thousands of dollars a year if they do not keep a handle on it.
As a rule, every cent you spend on paid marketing activities that do not directly result in a sale is wasted money. Sure, you can argue that this tactic is also helping your brand awareness.
However, if you find yourself in a position where you need to balance the books it is worth taking a back-to-basics approach to really get a handle on what activities provide you with the highest ROI.
Whilst doing that, you should also turn your attention to content marketing, PR and social media – all of which are free methods of promoting your business.
Be sure to set up a YouTube channel, as this gives you a brilliant platform to introduce your business or service to the world.
Post regularly on your Facebook, Instagram, Tik Tok and Twitter accounts as well and set up an email database of existing or previous customers you can send regular e-newsletters with special offers too. Social media is a massive part of our lives and most people have active social media accounts so it’s a game changer for a business to use social media platforms to introduce new products to their customers plus, statistics 2022 shows that 60 percent of purchases are made through social media and it keeps growing.
Really focus on an SEO strategy too, by adding regular, if not daily, content to your website in the form of a blog.
3. Use more freelancers
Excellent staff are worth their weight in gold, and you should do everything in your power to keep them.
However, that doesn’t mean you shouldn’t draw upon the freelancer market too.
A great way to cut costs for your operation is to use freelancers. This is a particularly good tactic for tasks like admin, content marketing or graphic design, for which you might not have the expertise in-house.
Platforms like Upwork provide you with connections to highly skilled freelancers from all over the world – with whom you can engage for any length of contract you want.
By outsourcing work to freelancers your current staff can focus their efforts on activities that play most to their strengths and also generate the highest levels of ROI
As your staff leave, you can also replace them with more freelancers, whom you won’t have to pay holiday leave, sick leave or superannuation to.
4. Lower Your Merchant Service Fees
Most business owners will tell you that when accepting credit cards or contactless transactions as a payment method these costs can quickly accumulate. Those that don’t are either not keeping a close enough handle on these costs or have adopted a solution like Smartpay EFTPOS.
This solution allows companies, particularly those who receive hundreds of customers a day, a way to substantially reduce and sometimes completely eliminate these fees.
If you run a business that accepts these types of payments, changing your provider can save you a significant amount of money in a short space of time.
5. Move Offices
For those who are renting an office space or shopfront, one of the best ways to cut costs for your small business is to move premises.
Finding a cheaper location from which to conduct your business activities might seem like a daunting or onerous task. But if you look at it from a purely financial perspective, it can make very good business sense.
Moving to a new building, particularly one that involves downsizing, can save you a small fortune in rent and operational costs like electricity and other utility bills.
This is a particularly good tactic for corporate or non-customer-facing businesses that do not rely on foot traffic.
Should it be appropriate, you might even consider becoming a fully-fledged online business that does not operate out of a physical storefront. Doing this would provide the clear benefit of slashing a huge chunk of your annual operational costs.
Other Ways to Cut Costs
As well as the five methods outlined above, other ways you can reduce costs for your small business include:
- Selling fewer products
- Renegotiating supplier terms
- Becoming a paperless office
- Limiting business travel, especially airline travel
- Reviewing your taxes
- Allowing staff to regularly work from home
- Introducing a 4-day working week policy
- Changing your business insurance provider
- Outsourcing the process of fulfilment
- Always asking for corporate discounts
We hope you will find these 5 ways to cut down on costs for your small business extremely beneficial.
With increased competition, external forces and changing consumer buying habits, running an independent business is becoming tougher than ever.
It is important, therefore, to constantly look for ways to not only make more sales but also to significantly reduce operational costs.
Doing this will provide your business with the best opportunity to remain sustainable in the years to come.