When your sales are down, and the number of customers has reduced, cutting costs in business activities can keep your company alive. As most people focus on improving sales, they forget about reducing costs in business expenses, which is equally essential.
A recent study shows that 20 percent of small businesses usually fail in their first year of operation. One possible reason is insufficient funds, which can result from uncontrolled expenses. So, cutting costs in business will help you gain control over your expenditure.
How to Cut Costs in Business Organizations
It’s no doubt that business costs keep increasing even as technology advances. Unfortunately, some businesses end up making multiple losses and eventually fail. As a responsible entrepreneur, you should keep your profits up by controlling your expenses.
Here are some of the practical ways to cut costs in business operations.
1. Save on Office Space Costs
If you’re spending a lot of money on office space, consider moving to a less expensive office space. If you must run the business on a commercial premise, you can move to a less spacious office or negotiate with the property owner to lessen their lease terms.
Another best way to reduce office space costs is by operating from home. However, you should do that when your business can survive in a non-commercial center. It will help you save on expenses such as insurance, rental costs, and business taxes.
2. Cut Your Production Costs
The primary objective of all entrepreneurs is to make huge profits. One of the best ways to achieve that is by lowering production costs as much as possible to maximize profits. However, the move should not compromise the quality of your products and services.
Here are some of the most effective ways to lower production costs.
- Use locally available resources to save on importation costs
- Take full advantage of all incentives available to achieve your business goals
- Maximize your production real estate by renting out unused space
3. Negotiate with Your Suppliers
Negotiating with suppliers can help you save on procurement costs when renewing your contracts at the beginning of a year. Talk to your suppliers to find out if they can offer better deals. If they refuse, shop around to find suppliers who offer better deals.
By testing the market, you’ll quickly determine if the new suppliers can potentially supply quality products and services at better prices. It will help you make informed decisions during negotiations. Generally, you should consider the supplier with the best deals.
4. Cut Back the Staffing Costs
If your family members (spouse and kids) are capable of working in your business, there is no need to hire people to do the work. It will help you save money on hiring. However, you should only involve your children in the business at an appropriate age.
Another powerful strategy is to hire workers on a contract basis. You can also work with freelancers to save on taxes and other expenses that come with employing workers. That way, you can save a lot of money when staffing your business.
5. Get the Best Exchange Rates
If your business operates in different countries, there is no doubt that you use currency exchange services more frequently. Notably, where you exchange your money can also influence your business costs in terms of exchange rates.
So, you should avoid currency exchange providers that charge high fees, like banks. Change your money in an agency specializing in foreign currency exchange, such as Knightsbridge FX. It offers consistent bank-beating rates to help you save more money.
6. Lower Vehicle Expenses
If your business needs a vehicle, there’s no doubt you’ll spend a lot of money to buy a new one, whether a van or pickup. Besides, you’ll need money to fuel and maintain it. So, how can you cut these vehicle expenses without affecting your business?
If you must buy a business van to supply goods, go for a used vehicle and not a brand new one. For a start, this can help you save thousands of dollars. However, the used van should be in excellent condition and consume a little fuel.
7. Save on Advertisement Costs
When opening a business, you don’t have to spend a lot of money on costly adverts like radio and TV. You can start by creating a business website to showcase your products and services. That will also help to improve your online presence and improve sales.
Alternatively, you can reach your target market through social media platforms, such as Twitter, Instagram, and Facebook. Another cost-effective strategy is email marketing. You can use it to update the target market on available offers and new products.
8. Make Good Use of Your Time
Maximizing your business time is one of the effective ways to cut costs in the business. For instance, if you make $30 per hour, there’s no need to drive for an hour to pick an item that you could order at a postage fee of $10. Otherwise, you’ll end up losing $20.
Here are some other time-saving strategies to consider.
- Keep workers focused on their tasks by using apps such as Focus Booster
- Set deadlines for tasks and reward workers who meet your expectations
- Schedule all your business activities and adhere to it
9. Let Full-Time Employees Work on Part-Time
Instead of laying off workers in your company, you can put the full-time ones on part-time contracts. If they worked for five days in a week, you could get them to work for three days weekly to cut your business costs. That will help you save a lot of money.
The main advantage of this strategy is that it helps to maintain employees’ morale. It also ensures that you retain useful brainpower in your business. Apply job sharing strategies to reduce the impacts of the action on your business operations.
10. Make the Most Out of Virtual Technology
Nowadays, it’s easy to carry out most business activities virtually to cut business costs. For instance, you can hold virtual meetings with workers to minimize travel expenses. Also, you can operate in virtual offices to avoid paying for physical space.
Cutting costs in business activities is essential as it helps companies improve their profit margins. However, businesses have different needs, whether big or small. So, you need to apply strategies that will lower operational costs and fulfill your company needs. It’s great that you now know how to cut costs in business operations.