Keeping your small business profitable can be tricky. Not only do you have to manage your personal and employee salaries, but you also have to pay for your office space, utilities, and all the other equipment necessary to keep your company producing. When finances get tight, you may think you have to cut one of your many skilled employees. While this is a perfectly valid response, it shouldn’t be your first solution. Talk with your accountant to see which decisions can cut your costs. You may be able to save money and your employee’s job.
Face it, your rent might be too steep for the amount of money your business makes. This is typically the most consistent, money-draining cost that your business will have to cover to break even. If you are barely covering costs, you likely need to relocate your business to a cheaper area.
This can be tough, especially if your customers are used to you being in a specific building. If you frequently have clients visiting your building, make sure to inform them of the new business location. Be aware that there are several other relocation costs you will have to fulfill before you can move your business as well.
Worst-case scenario, you will have to downsize your company. This typically means you have to reduce the number of workers you have to increase your profit margins. Employees are no doubt one of the most expensive investments an employer makes, so turning people away can be incredibly difficult.
There are two ways you can decide to let people go. You can select the newest employees who haven’t worked with your company for long, or you can choose the workers that make the most money. Typically it is smarter to send home newer employees in the long-term. Sending home older employees is a short-term benefit since you typically need experienced people to keep your company running.
Because of business expenses, it has become particularly common for companies to share certain spaces with other businesses. You typically see this with conglomeration restaurants that house two complementary foods next to each other, but office spaces and warehouses are increasingly becoming shared areas as well.
The best way to figure out who is willing to share space is by communicating with other companies who are in the same boat. Banding together to pay rent at the same place can reduce costs for as long as it is necessary. Work with the other business owners and your lawyers to strike a deal on who pays for what to ensure it is a mutually beneficial relationship.
You have to figure out ways to lower your business utilities. While this is by no means the highest cost you will face, poor energy habits and wasting other utilities you are paying for can add up over time. If you are unhappy with your current energy expenditure, you should make changes.
Summer months are typically the heavier energy months. You can reduce your cooling bills in the summer by adding tint to your windows. When winter rolls around, make sure your insulation is working and that drafty doors and windows are taken care of. Turn off lights when you leave at night. Basic energy-saving habits make a huge difference on an annual basis.
Paper documents are expensive. Most businesses fill up filing cabinet after filing cabinet with tax information, employee information, and client data. While keeping your records organized and safe is responsible and important, there are smarter ways to do it in the digital age.
Instead of consistently paying for office supplies, investing in digital storage is cheaper and more eco-friendly. Encrypting your data can keep your information away from hackers, and investing in a VPN will keep your information from other companies as well. While these processes can reduce your paper usage, you may still want to keep paper copies of your most important information—just in case.
If there is one thing the pandemic solidified, it was the ability for people to do most of their work from home. Remote work has provided people new opportunities to work for companies they never thought possible, and all the work can be done from the employee’s home office! Instead of paying for office space to accommodate each employee, you just need to send them supplies that will be necessary to do their job. This could include hardware like work computers or printers, or it could be software-oriented. This significantly cuts the cost of home office spaces and makes your life as an employer a little more flexible.
If you don’t want to hire another employee to do a very specific job for you, outsourcing is the solution. Many businesses will outsource their accounting jobs to other companies instead of hiring one permanently. This is particularly useful if you are a small business that just needs financial advice but doesn’t perform enough transactions to warrant a full-time accountant.
You may have other positions that don’t require full-time work as well. Observe what each employee does each day and decide whether their output is something that couldn’t be outsourced. You will save big and get great — if not better — results from outsourcing.
This is the simplest point, but if your business needs to save money, make sure you buy used products online. You don’t need the newest of everything, and used items often function just as well as brand-new ones. Watch for great deals in your area before you decide.
Of course, there can also be drawbacks to buying used. For instance, it is harder to make your office look uniform from a design perspective. You also might not see problems with the furniture until it’s at your doorstep. If you need the furniture fast, you might not have a chance to buy used — especially if you need a lot at once.
Implementing these strategies into your work can help you find more ways to cut your costs than you thought possible. If you aren’t sure what will work best for your business, talk with a financial advisor to get professional advice. Remember, change is always difficult, but in many instances, what comes as a result is better than what you had before.
If you still need to cut costs further, look at this article to see how proper training can help your business.