How can small businesses cut operational costs without negatively affecting their profits?
While big companies can afford to implement massive lay-offs to cut operational costs, this is probably the last thing small business owners will do to reduce the amount of money flowing out of their business. So, if you really want to save some money without crippling your business, you may want to consider the following suggestions:??
Improve the performance of your business. This is, undoubtedly, the smartest way to improve the financial health of your business. Measure and document your operational performance. Put audit trails in place and make sure that pertinent data is easily accessible at all times. This will allow you to uncover areas for improvement and see the results over time.
Cut back on discretionary spending. Consider eliminating all discretionary spending if you are having financial difficulties. Things like hiring new employees, buying new equipment and refurnishing your office can wait.
Use the right technology. You can streamline your processes and reduce the need for additional employees by having the right technology in place. It can also help you scale back on your marketing and advertising requirements.
Consider outsourcing. Doing everything on your own or having your internal staff do it for you may not be practical. It may even make it difficult for you to focus on the more essential aspects of your business. As such, you may want to consider outsourcing a number of tasks, except your company’s core skill, to a qualified vendor. This move may entail some additional cost but it can definitely increase your company’s efficiency and help you reduce your overall business costs over time.
So, what tasks should you outsource? To achieve maximum results, consider outsourcing repetitive tasks such as data entry, customer support, and highly specialized tasks such as web design, computer programming and IT support. You may also want to outsource tasks that require a high level of expertise (accounting, tax preparation, legal services, etc.).
Upgrade and recycle. Consider upgrading your equipment instead of buying new pieces of equipment. And get into the habit of recycling. Keep in mind that recycling is less expensive than trash disposal and that buying re-manufactured goods and those with recycled content can help you save money. In addition, it can help you comply with local solid waste regulations and the waste ban, and enhance your company’s image.
Master the art of negotiation. If your lease is up for renewal soon, try to renegotiate with your landlord to get a better deal. If you are leasing equipment that is not critical in your operation, ask the leasing company to renegotiate payments. You may also ask them to take back the equipment and cancel the lease. You may also negotiate with your suppliers and service providers and see if they can give you a better deal.