When I first moved out of my parent's house, my spending was out of control. I bought take-out regularly, new clothes often, and fun products frequently.
However, I quickly realized that I was spending too much money on unnecessary things.
After racking up some credit card debt, I realized that I needed to cut costs somewhere.
As a business owner, it can be just as easy to overspend as it was for me.
When that happens, it's time to review your bottom line and see how you can reduce your spending.
In this post, let's go over some of the top ways you can cut costs in your business.
Effective Ways to Cut Costs in Business
Analyze and track the efficiency of your business.
Negotiate with your vendors.
Bring efforts in-house.
Eliminate products that don't sell well.
Hire the right people.
Crowdsource when necessary.
Evaluate your technology.
Consider a remote set-up.
Buy in bulk.
Participate in loyalty programs.
Treat employees well.
Consider bundling your services.
Use reward credit cards.
1. Analyze and track the efficiency of your business.
Before you can reduce costs in your business, you need to take a step back and analyze what you're currently spending money on.
Take a look at your balance sheet and your budget. Look at your production costs, and do an in-depth analysis of your current processes.
Asking yourself questions like, "Is what I'm doing efficient?" and "Am I spending needless money somewhere?"
Once you have a full picture of what your spending looks like, you'll have a better idea of where you can cut costs.
2. Negotiate with your vendors.
A great way to cut costs in business is to negotiate with your vendors. You should price shop and compare vendors in almost every area of your business.
For example, if you're deciding on insurance providers or looking at supply costs, you should communicate with the sales reps that you're looking at other companies as well.
This will let them know that you aren't afraid to walk away and are ready to negotiate costs based on your research.
3. Bring efforts in-house.
Outsourcing can make sense if you don't require a full-time employee to do a task. However, bringing your efforts in-house might save you money if you're outsourcing several projects that could be assigned to one person in-house.
To decide if you need to bring efforts in-house, take a look at your current outsourcing budget, and compare it to the cost of one part-time or full-time employee.
4. Eliminate products that don't sell well.
Developing products requires time and money. Instead of selling a bunch of products that don't sell well, focus on the products and services that make the most money.
By concentrating on the products that sell, you can deliver higher quality products. Plus, you won't waste money on the services that aren't selling.
5. Hire the right people.
Hiring the right people is important for several reasons. If you choose employees that have specialized skills and are experts in their field, you'll have an efficient staff.
When your employees aren't sure how to complete a task, they'll spend time researching and learning about it on your dime. That can possibly waste both time and money.
If you focus on hiring the right people, you won't have to worry about whether your staff knows what they're doing.
Additionally, you should also hire for culture fit as well. You don't want to have too much turn over, because that can also waste money.
6. Crowdsource when necessary.
While you should bring efforts in-house if you're spending too much money on outsourcing, if certain tasks don't require a full-time employee, you can work with freelancers.
Freelancers are generally less expensive because you only have to pay for labor on a certain task. You won't need to pay for benefits or training.
If you don't need to have a full-time staffer on board to complete an assignment, consider using freelancers.
7. Evaluate your technology.
One of the top ways that businesses waste money is by subscribing to software you don't need or stopped using.
It's important to evaluate your technology needs on a regular basis and ensure your software is up to date.
You can hire an IT person to be in charge of consolidating your software needs and make sure you don't overspend on technology.
8. Consider a remote set-up.
When I was in college, I worked on a fully remote team of 10 people. If you're running a small business that doesn't necessarily require a physical office space, you should consider going remote.
Office space is one of the most costly expenses that companies spend money on, and you might not need to.
In fact, not all companies require physical space. Some positions are suited perfectly fine to a remote set up. This could end up saving you thousands of dollars a month.
9. Buy in bulk.
Of course, a great way to save money is to make purchases in bulk. However, when you do this, make sure that you're saving money.
Not all items need to be bought in bulk. For example, if your team doesn't drink a lot of coffee, you don't need to make that purchase in bulk. However, if your team can drink through bulk coffee quickly, then buying it in bulk will save you money. It just depends on your needs.
To save money, evaluate which items should be bought in bulk and which items can be bought on a smaller scale.
10. Participate in loyalty programs.
Let's say your company spends money on paper every month. This is probably a repeat purchase that you'll likely continue making for the duration of your business.
With these types of purchases, you should do some research and see if your suppliers offer loyalty programs.
You might be able to save money from the stores that you make purchases from all the time.
Additionally, you could also work out a trading system with other companies. Don't be afraid to talk to other business owners and see if you can work out a system with them.
11. Become eco-friendly.
Environmentally friendly appliances are great for the environment, as well as your budget. That's why you should consider becoming eco-friendly with your purchases.
For example, you could consider going solar, buying an eco-friendly fridge for your kitchen, etc. A lot of appliances can be made eco-friendly and save you money.
12. Treat employees well.
When employees are happy, they become advocates for your company and will want to stick around. This means you'll spend less money on training and onboarding.
When companies are more focused on the bottom line than their employees, they'll likely experience a lot of turnover.
I've seen this first hand and having a rotating door of employees will end up costing you more money than just treating your employees well from the start.
13. Consider bundling your services.
This might seem like a simple suggestion, but a lot of purchases can be bundled together. If that's an option, you should consider it.
For example, services such as phone and internet are usually bundled together. Bundling services will typically save you money.
14. Automate processes.
When your processes can be automated, you should do it. This means you'll spend less money on labor and you'll have a more streamlined process in place.
For example, if you use marketing automation software, your marketing team won't have to manually post on social media or send emails every morning. Instead, they can automate that process and it'll save them time and save you money.
15. Use reward credit cards.
As a business owner, you're going to spend a lot of money. That's why you should spend money wisely.
For example, you can get a business credit card to charge things to so you can make use of rewards or cash-back programs. This way your purchases will add up to rewards and bring you money back.
When it comes to reducing costs in business, it's not about looking for ways to cut corners or take advantage of your employees. It's about streamlining your processes so they're working for you.
Originally published Aug 27, 2020 4:30:00 AM, updated August 27 2020