10 Easy Ways to Reduce Your Operating Costs
Most business owners want to save money and increase profits, but reducing operating costs isn’t as easy as it sounds. Anything you take away impacts the people and processes of your business. Fortunately, there are many ways you can reduce expenses this year while still thriving as a smaller company.
Updated information from the Bureau of Labor Statistics shows that about 31.2% of small businesses fail in the second year. By the third year, 38.8% are out of business, and by the fifth year, nearly 50% shut their doors forever.
Reducing costs is one way to keep cash flow in check. Here are our favorite tips for managing how fast money goes out the door without making such drastic changes that you no longer recognize your business.
1. Automate Your Business
Technology can help automate redundant processes in your business and put your focus on creative, fresh additions. If you find you repeat the same task over and over, see if there is a computer program that can automate the work.
A common example of this in action is social media and marketing. You might want to focus on the nuts and bolts of your business, not your social media posts. Free up your own time and energy by bulk scheduling social media posts once a week using the platforms themselves or social media automation tools — and boom, you don’t have to come up with something to say on Instagram every single day.
2. Ditch the Late Fees
No matter how well organized you are, you likely wear a number of hats as a small business owner. Some things may slip through the cracks, like payment due dates.
If you find late fees adding up, seek automated solutions, such as auto draft or setting up regular payments via your bank. Spending even a few dollars on something like late fees can add up over time without creating value for your business.
3. Switch Your Lightbulbs
Sure, you could do a full energy audit of your office, whether it be in your home or in a commercial building, but one simple thing you can do to save money and reduce your carbon footprint adds LED lights. Switching to LEDs is a simple, fairly affordable move that reduces operating costs over time.
For example, if you have just five lights in your office that you switch to LEDs, after 3 years you could have saved approximately $321 in energy costs. It might seem like small potatoes, but small business owners know that those reductions in cost can compound — entrepreneurs know that margins matter.
4. Embrace Smart Thermostats
Another office-oriented savings strategy is taking control of your heating and cooling costs. Smart thermostats are all over the market these days and provide an easy and automated way to keep track of these systems. Nest, one of the nation’s top thermostat makers, reported users to save as much as 15% on cooling costs and up to 12% on heating.
You will have some upfront costs buying the thermostat, but by year two, the savings should be all yours.
5. Negotiate Rates
Small businesses have a lot of recurring expenses, including insurance, subscription services, and contracts with third parties. Look at fees for different services that may offer some negotiating room.
Spend a little time calling services you’ve dealt with for a while and try asking if there is any way to get a discount or reduce spending. Some things are less negotiable than others, such as your electric bill, but suppliers and those with a little competition may give you a discount to keep your business.
6. Hire Freelancers
Although you should ditch the costly experts you don’t need, you should hire freelancers for the bits and pieces of work you need to be done. Maybe you’re looking to develop copywriting for your business’ website or level up your business photography, but you don’t have any time available to tackle those aims.
If it doesn’t make sense to have a full-time employee on the task, or your workers don’t have time in their schedules to focus on things, go ahead and hire the virtual assistant or web designer for the occasional small job. Freelancers can help you achieve small goals while keeping your full team focused on the business initiatives that matter most.
7. Lose Your Landline
Most business owners now use their cell phones and a dedicated business number to do most of their work. Landlines can be costly, especially for business accounts.
Decide whether you truly need one to finish your daily work and talk to customers. A business phone line costs around $100 per month for most business owners, whereas VoIP might only run $25 per month.
8. Go Paperless
This step really comes down to your specific business, but many small businesses can move away from printers, paper, and ink and look toward digital solutions. Not only can printing be expensive, but it’s also a pain to constantly restock and store large stocks of paper supplies.
Digital payment systems can reduce your need to send physical invoices to clients. Similarly, digitizing files can reduce your need to invest in heavy filing cabinets.
9. Cut Down on Travel Expenses
Are you constantly running around town to meet with clients and chat over business opportunities? Face-to-face communication has huge benefits, but many business owners can free up some commute time and streamline communication by setting up virtual meetings for less-critical calls.
Think of the gas, time, and food expenses associated with frequent travel. Getting creative to find strategies to cut back these costs can be both a financial and occasionally a mental relief for busy professionals.
10. Downsize Your Office
Let your employees work from home or choose hybrid solutions. Unless you run a manufacturing facility, you likely don’t need people in the office all the time. Even in a restaurant, there are bookkeeping and scheduling tasks people can do from home.
Allowing staff to work remotely allows you to slash huge overhead costs by reducing the size of the space you need to run your business.
Opportunities to Reduce Your Operating Costs
Keep your eyes open for chances to reduce your spending. Operating costs have a way of creeping up over time. A small increase by a provider and lack of time on a busy small business owner’s part means higher fees than you need to be paying.
Review your costs every year, make phone calls, or seek new providers. Pay attention to both big and little expenses to save the most money possible.
Evelyn Long is a writer and editor focused on home building and construction. She is the co-founder of Renovated, a web magazine for the home industry.
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