Is there such a thing as a business that doesn’t want to save money? Nope!
Looking at your expenses and making a budget for your business can be relatively straightforward, but it isn’t always easy to determine where, exactly, you are losing money and what, exactly you can cut to achieve the maximum result with the least amount of disruption.
Here are ten places to look to help your business save money:
- Review your expenses.
- Compare and save.
- Check your financials.
- Don’t take on debt if you don’t need to.
- Market wisely.
- Get environmentally friendly.
- Don’t be afraid to negotiate.
- Check your inventory.
- Maximize your space.
- Maximize your team.
- Bonus!
1. Review your expenses. This may seem obvious, but not everyone sits down and actually looks at where the money is going each month. The big expenses like rent and utilities are easy to calculate, but what about the smaller expenses like subscriptions, small Amazon office supply purchases, and that extra run to Costco? All of these expenses add up quickly, so it’s important to keep a close watch on your spending, especially if you have a bookkeeper or business partner who records everything for you. It’s easy to forget what you bought when someone else is buying and recording the information.
I’m not saying some of these expenses won’t be necessary, but there might be ways to save money if you notice certain patterns. For example, if you are buying one ream of paper at a time for $20, but you see them on sale in bulk for $30, it’s worth the extra initial payment to save overall. The same goes for paying in full versus paying by the month with interest. If you can afford to pay items all at once (for example business liability insurance), you’ll save more in the long run—sometimes hundreds of dollars at a time.
If you have QuickBooks (and if you don’t, here is an article I wrote on why you should), then get familiar with the Report P&L by Month! I absolutely love this report (and yes, I realize how pathetic I sound by loving a QuickBooks report, but it’s true). This will show you how your spending varies from month to month within individual categories so you can instantly see if something is amiss. Love it!
Other than that, make sure to track spending from category to category (like advertising, cost of goods sold, independent contractor labor, etc.) and review bank and credit card statements every single month.
2. Compare and save. There is a reason why discount supply stores, bulk chains, and coupons exist. If you use these resources in the right way, you can save hundreds and even thousands of dollars by buying from the right place at the right time. So, take a bit of time to do your research. If you are in the market for new office furniture, it’s worth it to wait for a sale or shop around, rather than satisfy your instant gratification by jumping on the first thing you see. Yes, you can wait a little bit and make do for a while before those types of purchases are made.
All that being said, I want to point out that your time is worth money, too. So, before you spend a solid week researching every possible pricing point, remember that activities like that cost you time, and time is money. Don’t second-guess yourself by overanalyzing every purchase.
3. Check your financials. This may seem an awful lot like reviewing your expenses, but it’s more than that. Take a deep look at what you’re paying for items within your financial costs. Think bank fees, interest, insurance rates, credit card fees, etc. Your insurance and financial accounts might be costing you more than you realize, and it’s easy to overlook these.
Start with your bank. Are there fees associated with the type of account you have? If so, can you “downgrade” to a different type of account to avoid these? Sure, the higher-level account that costs only $10 a month gives you free wire transfers, but when was the last time you made a wire transfer? Sometimes that “great deal” the bank is giving you, isn’t so great for your particular business and its activities.
Next, review your insurance. We already mentioned how paying in full could save you, but reading the fine print could help, too. If you have more than one type of insurance policy, for example, liability insurance, property insurance, and hurricane insurance, double-check that the policies aren’t overlapping. You don’t need to be over-insured with duplicating coverage. It’s not “safe,” it’s stupid. No insurance company is going to pay you twice over for the same issue, so don’t pay them twice.
In addition, if you see a better rate, but are happy with the service you are receiving, it can’t hurt to call up your agent and ask if they will match the price. The answer is always no if you never ask. If you want some more information on insurance, check out my article here.
4. Don’t take on debt if you don’t need to. I have always been a bootstrapper, so I don’t believe in taking out loans to pay for my businesses. I did it once, and that was enough (in fact, it got me into a little trouble that I could have avoided by just waiting a year instead of seeking funding I didn’t actually need).
When you are considering applying for a loan, no matter how small, do a thorough (and I do mean thorough) cost-benefit analysis. If the reason for the loan is to expand your business, take into account a realistic (maybe even a pessimistic) forecast of expenses and profits. Your loan payment will become an ongoing debt payment on your cash flow. Can you really afford it?
5. Market wisely. Marketing and advertising are a big issue (and big expense) for small businesses. You need advertising to bring in paying customers, but you need paying customers to pay for all that advertising. It’s a vicious circle. You don’t want to eliminate advertising altogether, but it’s worth looking into cheaper alternatives that might help reduce costs.
Build your customer email list first! This is one of the most cost-effective ways to reach your ideal clients, after all, they are already your clients! Implement a referral program (and make sure they know about it) to appeal to those customers even more. And bonus, a client referral is much more likely to result in a new customer than traditional marketing, plus your client gets something in return, endearing them more to the company. Win-win-win.
How are your networking skills? I’ll admit that mine used to be much better (thanks a lot, Covid). But networking more, and advertising less can make a huge difference in your business. Connect with your clients. Meet more people and talk about your business! You never know where you’ll find a new client. Not all networking experiences are free (check out BNI! I love this networking opportunity), but often they are focused specifically on getting you more business.
And, of course, I had to mention social media. For the most part, it’s free, and I have to admit, no matter what my personal opinion is of these platforms, social media works! Just be sure to follow the 80/20 rule when posting. Want more on what to avoid when posting to social media? Check out this article. Not sure which platform to use? Read this!
6. Get environmentally friendly. We can’t all get solar panels and electric company cars, but making some small, eco-friendly changes to your office could affect your bottom line. Most notably is often paper and ink consumption, as well as postage expenses. Email invoices instead of mailing them. Collect online waivers rather than physical ones. Use collaborative online software/documents like Google Drive and Microsoft Sharepoint to provide an alternative to paper documents and meetings. There’s a reason major companies like banks offer discounts when you go paperless! It saves them money! You should also look into energy-saving devices like automatic thermostats, energy-efficient lightbulbs, and similar technologies.
Is there a possibility of going virtual? Working virtually used to have a rather negative stigma attached to it. Since the Covid pandemic, all that has changed. More and more people are working from home and no one is balking at it, so if you can operate your business from home, definitely cut the cost of renting space, or downgrade your space by allowing some of the office to work remotely. You can even rotate their work schedules so everyone shares only one or a few desks, while still giving you the facetime you want or need with your team.
7. Don’t be afraid to negotiate. Sometimes you love the status quo of your goods, services, and suppliers, but aren’t too keen on the price point. There is absolutely nothing wrong with negotiating! A lot of business owners are worried about how they will look or what the answer will be if they try to negotiate, but there is nothing wrong with considering all your options. Even better, let your vendors know you are considering other options and flat out see if they are willing to work with you on a better deal that will work better within your budget.
Can you ask for a volume discount or consolidate vendors so you are buying in bulk at a lower rate? Can you negotiate discounts for early payment? There are lots of ways to finagle a better rate!
You can also negotiate with your landlord (yes, really). If you’re not locked into your lease, then you can consider moving to a more economical location—whether that be in square footage, physical location, or otherwise. If your lease is up for renewal, it’s important to always negotiate, especially if you are considering other options. You should also ask for upgrades, like more energy-efficient windows, that could save you money in the long run, and maybe even save your landlord on taxes (I used this method to get solar panels installed at one facility). You never know what your landlord might be willing to cover to keep you as a tenant!
8. Check your inventory. Not everything is a sales winner. If you have extra inventory lying around, cut your losses and sell it already. If you priced it right from the start, you might be able to offer a 50% discount and still recoup some of the expense, or at least break even. Looking for some advice on how to determine pricing? Check out my blog article on How Not to Price Your Product or Service.
If you actually produce your own inventory, then you know how much money and time it takes to make and sell those products. Instead of wasting money on something that doesn’t sell well, focus your energies on the products and services that do. By concentrating on these products, you will be able to deliver higher quality, and maybe even identify new products to compliment your best-sellers.
9. Maximize your space. One of your greatest expenses is rent, so when was the last time you looked at how you’re using that space? You only have access to so much square footage, so make sure you make the most of it. How can you give certain spaces double-duty? Can your break room also act as an additional storage space? Can a fitting room also become a marketing venue? Are you efficiently using all the space you have?
Moreover, are you able to rent out your space (or parts of it) when it’s not in use? Depending on the nature of your business (and the restrictions of your lease), there might be some exciting opportunities to use your space in a different way while capitalizing on some extra income.
10. Maximize your team. Everyone brings something unique to the table and if you hired the right person, then you might be able to use that to your advantage. Leveraging the people you have can make all the difference in how efficiently your business runs. Is there a service you are outsourcing that could be assigned to someone in-house? Do you have a great employee working in the wrong department? You want to make sure the tasks and responsibilities given to each employee match their skills and efficiencies.
In addition, and I can’t stress this enough, treat your team well. Treat them the way they want to be treated (not the way you want to be treated) and your team will become solid advocates for you and your company. That means less turnover, less time wasted training or hiring, and an overall better work environment for everyone. Happy people are better workers. Period.
BONUS: Hire an expert to cut costs. Sometimes you have to spend money to save money. If you are truly having trouble cutting costs, it might be time to call in an expert to help you with a cost reduction strategy and action plan. Maybe that’s an accountant or CPA, maybe that’s a coach who loves to look at the numbers (*cough, me), but if you are really finding the whole process tedious and challenging, it’s okay to ask for help.
Learning how and where to cut extraneous costs in your business is essential to both the overall health of your business books and your time and sanity as an owner. Whether your business is big or small, every penny counts.
From negotiating prices to cutting costs appropriately, following these tips can save you hundreds and even thousands of dollars and allow you more room to allocate funds to what matters most in your business growth. Don’t overlook your books! And if you need help, schedule a call with AF Consulting Team. We’re here to help!