For many new entrepreneurs, money management and cash flow are always on the mind, especially when considering that about half of small businesses fail within their first five years, according to the U.S. Small Business Administration. Small business owners walk a narrow line when it comes to their finances. With talks of a struggling economy and rising inflation circulating, it’s no wonder many are buckling their seatbelts.
Regardless of the current economic climate, many small business owners will wonder at some point, “if it comes to cutting costs, where do I start?” It’s a valid question that deserves careful consideration for anyone looking for innovative, efficient, and cost-effective solutions that will keep their operations afloat.
For those putting their finances under the microscope, here are seven ways small businesses can cut costs.
Small business tips for cutting costs
1. Go for low-cost marketing strategies. Review your marketing plan and go through your various marketing strategies to evaluate your methods. Diagnose your advertising initiatives’ performance, cost and ROI to determine what’s really making an impact. If the revenue gained from your marketing doesn’t justify the spending, be ruthless and pull the plug on these campaigns.
And, if you haven’t already, shift your budget to focus on online marketing channels like social media platforms and search ads. These can be cheaper and more efficient than conventional marketing as they provide real-time measurables and even free word-of-mouth opportunities on local blogs, community pages or social bookmarking sites.
Lastly, create and post videos of your products or services on your website and social media channels. When done effectively, a quick video shot on a smartphone can create real, authentic engagement opportunities with your local customers.
2. Go green. If you run a small business, transforming it into an eco-friendly operation might not be your top priority, but it could save you money in the long run.
Remember, going green doesn’t necessarily mean outfitting your roof with solar panels. Start by focusing on the little things. Businesses with an environmentally aware mindset use fewer resources to get the same work done, and that sort of efficiency can slash expenditures. Here are some simple ideas for lowering your overall energy costs:
- Making it a company policy to turn off all lights, PCs, equipment, and machinery when not being used.
- Reduce unnecessary waste to cut down on waste removal costs.
- Have a clean energy assessment to determine what areas your business can cut energy consumption and expenditures.
If your company is working to become more eco-friendly, let your customers know how you’re going green. Your efforts could steer eco-conscious consumers your way.
3. Reduce travel costs. While it’s true many still like to meet with clients face-to-face, is this necessary for your business? Video conferencing platforms like Zoom have changed the game for business operators over the last couple of years and could prove cost-effective moving forward. Taking it a step further, consider hosting webinars or web conferences to deliver company presentations.
4. Commit to telecommuting. This is not an option for every business. Still, something the pandemic illuminated was how companies and employees can operate from home, especially when there are so many collaborative online tools available like Google Hangouts, Microsoft Teams and Slack. Committing to a telecommuting workforce model could significantly impact costs when renting space is out of the equation.
5. Reduce supply expenses. While assessing your supply chain strategy, pay close attention to who you’re buying from. Are they priced fairly? Do they offer discounts for loyal customers? Shopping around can dramatically reduce the price of products by hundreds of dollars, especially if you can avoid markups by sourcing materials directly from a production company.
Additionally, explore consolidating your suppliers and invoices. Buying from one source will increase your negotiating power and even increase your savings when you team up with other businesses and buy as a group.
Lastly, stay alert to opportunities to buy your supplies and equipment in bulk. The initial cost is a little more, of course, but it will save you time and money in the end.
6. Cut production costs. Business owners should constantly look for ways to minimize their production costs by optimizing their resources. Here are two ideas for reducing your production costs:
- Instead of sending leftover materials to the recycling center, try selling them. Leftover paper, cardboard, or metal can make you a lot of money. Also, consider ways to reuse your waste to create another product. For example, wastepaper could be used to make packaging bags.
- Get the most out of your used production space. This can be done by centralizing or consolidating the space necessary for production and then leasing unused space to another business or individual.
7. Make your employees happy. Make employee retention a priority by investing in them; this is crucial to your business’s success. If you’re losing well-qualified employees after years of service and dedication, hiring and training new employees requires a lot of time and money.
If you’re experiencing a high turnover rate — that is, people in certain job positions are frequently quitting their jobs — it may be time to look at why. Ask the tough questions of your company: Is your compensation competitive? What is the company culture? What benefits do you offer? Are you providing the proper tools and equipment? Is the working environment clean and safe, or does it need improvement?
Sometimes it just takes a little appreciation. Thanking your employees with a catered luncheon, a small reward, or a company outing can help make them feel appreciated for a job well done. Also, working with a bonus structure or incentive can further motivate employees. Most importantly, take some spare time to sit down with your employees to discuss their jobs; ask what makes them happy and explore what needs improving.
BBB Great West + Pacific contributed to this article.