Small business owners need ways to increase their profit margin without buying more inventory, adding employees, or spending money on costly advertising. The best cost management ideas start with cutting expenses.
Let’s look at ways an owner might cut operating costs and reduce overhead.
1. Let Technology Help You
Many software products allow you reduce administrative costs such as accounting, invoicing, and payroll. Instead of hiring accountants and payroll companies, let technology automate these tasks. These programs significantly reduce the cost of paying employees and cut the risk of human errors.
2. Lease Your Heavy Equipment
Buying warehouse equipment such as forklifts costs a lot of money. Instead, try leasing equipment. You only pay when you use the machinery, plus you don’t have to worry about where to store large pieces of equipment.
3. Change Your Marketing Strategy
Instead of hiring a marketing agency, use the power of the internet to reach customers. Check for low-cost or free ads allowing you to target the people who need your services. If you need help writing the copy, hire a freelance copywriter. Freelancers usually charge either an hourly rate or per-word rate and most are available at around $15 per hour or at five cents per word. Hire a freelance graphic designer, too. Websites like Fiverr.com or 99designs.com offer freelancers for as low as $5 per task.
4. Talk to Your Vendors
Many vendors offer discounts for paying an invoice early. Saving 1 or 2 percent each time you pay adds up fast. Also, create a little competition and make your vendor search a bidding process.
Decide on the exact elements you need and check prices with several vendors. If you prefer a certain supplier, but their prices are too high, see if you can bring the cost down by telling them what the others charge.
It’s amazing how many vendors reduce prices when faced with losing a customer.
5. Go Paperless
Smartphones, tablets, and laptops make communication easier than ever. Instead of printing stacks of paper for distribution, send an email. Cloud providers allow you to store and share documents with employees or clients. Plus, get rid of those ugly filing cabinets that take up room and reduce your office space.
Going paperless helps the environment, too, by the way.
6. Reduce Travel Expense
Airline tickets, hotels, and eating on the road make up a sizable amount of some business budgets. Instead of going to a client or supplier, use video conferencing. Many sites offer free video conferencing or charge fees considerably less than what travel costs. For instant contact, check out Skype or Google Voice.
Takeaway
Reducing operating costs saves money and directly contributes to your bottom line. Talk with employees and customers for ideas on reducing costs without hurting quality.
There is no perfect solution since each business faces its own unique costs and needs. But, by streamlining your operating expenses, you improve your margins while still offering excellent products and services to your customers. Not only will your clients appreciate that, but you now have funds to work with for expanding other areas of your business.