Cost Cutting Tips for Your Small Business
A concise guide to cutting costs without compromising on your business’ productivity
Regardless of whether a company is growing successfully or beginning to decline, businesses will always look to cut costs to help boost turnover and drive up revenues. And though a streamlined business that cuts down on wastage and unnecessary costs is one more likely to be successful; doing so without compromising on productivity can be a challenge.
Getting your staff on board to help is fundamental to this as slashing costs without explaining why will create a disgruntled workforce and hinder your ability to introduce cost effective measures. That said it is likely you will have to make some ruthless decisions in order to save money.
Key areas in which to cut costs and questions you need to ask as a business owner include:
Business travel and accommodation:
Limit staff business trips and switch to online conferencing where possible, with today’s technology making online interaction more efficient and accessible than ever before this is relatively easy. If trips are necessary however, you can decrease the level of costs by cutting down on first class or business class tickets and taxi hire, and by switching to budget hotels only.
Communications and IT:
Unit costs are coming down all the time, so make sure to complete a supplier review frequently to ensure you are getting the best value. Additionally with technology updating constantly, it may be worth hiring expensive equipment as this will allow you to stay updated without continuously purchasing new equipment.
Revaluate your professional services expenditure:
Though outsourcing can be a great way to fulfil a short-term role, it is important to utilise the talent within your workforce – is there an employee who can do the job? And if not, could the role be fulfilled by a student/intern looking for experience. Consider your options and figure out the cheapest way to outsource, without effecting the quality of the work that needs to be done.
Absenteeism has a major effect on productivity:
Missing staff due to whatever reason can cause a huge strain on your business and though sometimes it is inevitable, some actions can be put in place to minimise this long term; such as setting up healthy working incentives and making flexible working an accessible option.
Running costs and overheads:
As with communications and IT it’s key to evaluate running costs and overheads when addressing costs – could you relocate to cheaper premises? Are you paying too much for electricity and gas – is it worth switching suppliers?
Check your office supplies:
This may seem obvious but so much inventory is left sitting in cupboards. Make a checklist of what, and the amount of, supplies you have and ensure your staff update as you go along; this way when you are ordering you can easily identify what you actually need – instead of wasting money by buying bulk orders.
This is the toughest area of the cost cutting and only generally done as a final resort. However, this is likely to bring in the largest saving to the business. As an initial step, find out if any of your staff are prepared to cut their hours or take a pay reduction to help the business. Check out our feature on handling dismissals to guide you through the process safely.
The advantages and disadvantages of cutting costs
The advantages of cutting costs are obvious – it saves money which you can re-invest in your company’s growth. However, another crucial advantage which shouldn’t be overlooked is that taking the time out to review your spending and thinking of innovative ways to reduce costs will help your business come out leaner, and more cost effective.
On the downside, you can’t always please everyone and some members of staff may not support your plans to cut costs. You may have to downgrade some luxuries – such as business lunches, trips abroad and first class travel along with staff perks like subsidised gym membership and work parties. But it is vital to ensure staff understand that making the business profitable will be more beneficial to both them and the company in the long term.
Remember some of the easiest costs are the most straightforward and environmentally friendly: turn off lights; don’t leave computers, printers, copies etc. on standby overnight; encourage staff to lift share; reduce paper wastage by printing on both sides, and don’t buy anything unless you are really sure your business needs it.
Additionally checkout price comparison sites regularly to find the best deals available on things such as utilities, broadband, and insurance. With all of these things, your staffs contribution and attitude is vital, communicating why you are installing this limits and your goals in doing so is essential.