- Cutting business costs is possible with careful planning.
- Taking your time to find out what can be cut and what cannot can help you eliminate unnecessary costs.
- Eliminating all costs is not possible, but cutting unnecessary expenses can help your business.
From employee salaries to office space, costs add up quickly when you run a business. Each company has its own set of expenses, and although you can't eliminate all costs, you can make some changes to reduce them. Business owners shared some suggestions for how to reduce business expenses. Here are some cost-cutting solutions your peers have tried that might work for your business.
1. Look at your insurance.
When you are trying to cut expenses, it's important to evaluate where money is going and whether you can renegotiate contracts, including those for insurance.
"Insurance coverage and rates tend to change from year to year, dependent upon industry trends and market performance," said Joseph Jonas, director of wholesale and consulting at Insureon. "It's a best practice for small business owners to re-evaluate their insurance program on an annual basis to ensure they are getting the most comprehensive protection at fair market value."
Business owners who allow their insurance to renew automatically rather than consulting an insurance professional may be paying more than they need to. In addition to reviewing insurance prices, business owners should consider bundling coverage.
Taking the time to adjust this coverage based on the current market can save you thousands while not compromising your protection. Raising deductibles, valuing your space differently and even taking previous claims into account can result in a more targeted, lower-cost policy.
It also may help to bundle policies. As with auto and homeowners insurance, "many insurance carriers offer price breaks when small business owners purchase multiple policies at the same time," Jonas said.
One of the most common bundles, he said, is a business owner's policy, which pairs general liability coverage with commercial property insurance.
2. Evaluate your contracts, and look for free resources.
Spencer Shaw, owner of Re-Bath Spokane Valley, suggested evaluating the office space you occupy. "If the market is soft and there isn't high demand for what you occupy, start negotiating a lower rent," he said. Similarly, if you can work out of less space, it may be time to downsize until demand is up again and you need a larger space.
But being loyal to a vendor also can have perks. "Periodically, let your vendors know you are price shopping; a lot of companies have loyalty rewards or have the ability to cut you a deal if you continue to work with them," said Haley Palmer, owner of WIN Home Inspection Central Oregon.
In addition to reviewing existing contracts, Palmer recommended finding free resources, such as social media and business networking websites. A strong social media presence can be a powerful marketing and advertising tool, helping to get your business's name out there and attract new customers.
3. Review your staff's responsibilities.
Payroll is one of your significant expenses. If your staffers are in the wrong positions or aren't doing their share, you're losing money.
"Before you jump to hire, make sure you are thoroughly reviewing the day-to-day workload of your staff," Shaw said. "Make sure the right people are in the right seat, pulling their weight. Sometimes changes are required that can prolong the necessity to hire the next person too early."
"Forecasting sales ensures you have enough staff but also that you are not overstaffed and thus increasing your labor," added Andrew Diamond, president of Angry Crab Shack.
It's also important to stay up to date on best practices so you can prepare for possible wage increases. "Stay current on any new laws or wage increases in the coming future so you have a plan on how to deal with the increase in your payroll," Diamond said.
4. Adopt virtual technology.
Finding out if there are ways to incorporate virtual technology into your business may also help. If you have tasks that can be completed with a computer and do not necessarily require the hiring of another employee, using virtual technology can help to cut costs.
In addition, virtual technology can help to increase employees' productivity, which also saves the company money.
5. Consider your office-supply costs.
Supplies account for a larger portion of your budget than you might imagine. Though having the best pens and the highest-quality paper might seem important, it is surprising how much money you can save by making small changes. To implement this change, start by tracking supply usage within your office.
Seeing what you truly use can allow you to shorten the list of necessary supplies. You should also take the time to shop around to get the lowest prices available. You can find some great deals by shopping at nontraditional office-supply sellers and online retailers, like Amazon, and by buying in bulk.
6. Hire an expert.
If you're still looking for ways to cut costs, considering hiring an accountant.
"There is almost always an area of your business where you can save money or reallocate it to spend it more wisely," Palmer said. "It might even be beneficial to hire an accountant or CPA to help you look at the books to figure out ways to shrink your spending." [Read related article: Accountant vs. Bookkeeper: What Do They Do for a Business?]
Evaluating your spending and your overall costs can make a big difference in your business expenses by cutting unnecessary costs and allocating the money where it's truly needed.