Small businesses often operate on tight budgets, making it essential to reduce expenses wherever possible.
Cost cutting or at least optimising business costs can help you not just to save money, but can also help streamline resources and potentially even invest in growing your business faster.
Identifying and cutting unnecessary costs is not always as easy as you think though. Many things might seem like an essential purchase, or a cost of doing business. But small business owners can free up funds to invest in growth and development, increase profitability, and improve their bottom line.
Whether you're a sole trader or limited company, let's explore some effective strategies for reducing small business expenses.
The first step in reducing small business costs is to analyse where the money is going. Start by identifying the areas of your business operations where you are spending the most money.
This may include:
Once you have identified these expenses, analyse which ones are necessary and which ones can be reduced or eliminated.
Creating a budget plan can help you keep track of your expenses and identify areas where you can make cuts. Divide your expenses into categories, and then, set a budget for each category. You can then track your actual spending against your budget.
This will help you identify areas where you are overspending and adjust your budget accordingly.
As an example, you identify that you pay for a large office in a central city location, but many of your staff could work remotely
In this instance, you might find it more cost effective to downscale your business premises, ask your employees to work from home, but hire a co-working space or managed offices. These are often much cheaper alternatives than running an entire office, with utilities, business rates and other expenses often factored in to the monthly cost.
The benefits to using a co working arrangement are that you can still access desk space, a meeting room or even use storage space, but without the commitment of your own rental agreement.
Many business costs also come from things like excess office supplies. For example, very few businesses actually need printing in the digital age. So you can cut costs by removing your printer, not buying printer paper or ink refills or needing to pay for maintenance.
With less people in your office, you may also be able to reduce costs associated with sundries for employees. For example, less drinks and tea making supplies and other 'benefits' for in-person employees.
Once you have analysed your expenses and created a budget plan, it's time to start cutting unnecessary expenses. Conduct an audit of your monthly bills to identify any services or subscriptions that you no longer need.
For example, you may be paying for a software subscription that you no longer use or benefits that employees don't use, such as fruit baskets, office dog rental or breakout rooms.
Negotiating better deals with vendors and suppliers can also help you reduce expenses. Reach out to your suppliers and ask if they can offer you a better rate or discount. You may be surprised at how willing they are to negotiate, especially if you are a long-time customer.
Marketing can be a significant expense for small businesses, but it's also essential for attracting new customers and growing your business. Fortunately, there are several cost-effective marketing strategies that you can use.
Social media marketing is a powerful tool that can help you reach a large audience without spending a lot of money. Be sure to create profiles on popular social media platforms like Facebook, Twitter, and Instagram. Post regularly and engage with your followers to build a loyal fan base.
Creating a referral program is another effective way to attract new customers. Encourage your existing customers to refer their friends and family by offering a discount or other incentive.
While many businesses will invest in organic traffic, or SEO, which is a wise long term strategy, some may also invest in pay per click ads or PPC. This can be very expensive, so consider if it's possible to cut this marketing expense in favour of building your social media or organic traffic.
Hosting events and workshops is an excellent way to build relationships with your customers and establish your business as an industry leader. Consider hosting a free workshop or seminar related to your industry. This will not only help you attract new customers but also build trust and credibility with your existing ones.
Managing employee expenses effectively can help you reduce costs significantly. Implementing a company-wide expense management policy is an effective strategy. This policy should outline the types of expenses that are reimbursable and the process for submitting expense reports.
Encouraging employees to save on travel expenses can also help reduce costs. For example, you could encourage employees to take public transportation instead of driving or to stay in budget-friendly hotels.
Remote work can also help reduce costs. Allowing employees to work from home can help you save on office space and utilities.
Outsourcing work to freelancers and virtual assistants can also help you reduce costs. For example, you could hire a virtual assistant to handle administrative tasks like data entry or social media management.
You might also find that outsourcing bookkeeping or accounting saves you a lot of money. A full time accountant might seem like a necessary hire, but you can significantly cut business costs by hiring externally.
Reducing small business expenses is essential for maintaining profitability and ensuring long-term success. Here at Henderson and Co Accountants, we're experienced working with business owners from sole traders and freelancers, though to startup businesses and bigger national firms.
So we know what it takes to optimise your cash flow and help business owners like you make smart financial decisions.
Whether you're looking at ways to streamline your operating costs, you're considering business expansion, or you want to save money and hire an outsourced accountant, we're here to help.
Book a no-obligation discovery call, or go for the old fashioned method and simply call us....
