- It can be challenging for small businesses to cut back on certain expenses, but there are strategies you can employ to trim your overhead costs and streamline your operating expenses.
- Some of the ways you can reduce costs for your small business including powering down non-essential appliances, making use of passive energy saving measures, buying second hand equipment, and more.
- Collectively, adopting a frugal approach to assessing all outgoings can make a substantial difference to your bottom line.
According to the Small Business Administration, approximately half of all new business ventures fail within their first five years of operation. While it can be understandable to focus entirely on increasing sales, you may want to lower your expenses to maximize profitability.
It can be challenging for small businesses to cut back on certain expenses, but there are strategies you can employ to trim your overhead costs and streamline your operating expenses.
Here are eight ways to reduce some common expenses and quickly expand your net profit margin without crippling your small business’s capacity for growth.
1. Power-down non-essential appliances, machinery, and lights after-hours
This is a super-simple way to reduce your business’s electricity bill without affecting any day-to-day operations. For example, computer workstations are the biggest energy suckers in offices, so ensure they are all powered down at close-of-business. Turn off all desk and overhead lights, or instruct any cleaning teams to do so when they leave.
In any other industrial or restaurant facilities, do the same – power down any appliances and machinery that is not required to run overnight.
2. Install a smart or otherwise programmable thermostat
Air conditioning and heating expenses aren’t negotiable, and it is essential to run them optimally to ensure the smooth running of your operation, as employee and customer comfort matters. That said, there are still ways that you can save money on such costs.
Smart and programmable thermostats can help to reduce your climate control costs without affecting everyone’s comfort. Once installed, smart thermostats gather information regarding your climate control needs and preferences and adjust themselves automatically to maintain a comfortable climate as efficiently as possible.
According to the leading US smart thermostat company, Nest, users enjoyed 10-12% savings on their heating and 15% on their cooling expenses. For larger facilities, though, it will be necessary to invest in commercial-grade climate control systems.
3. Make use of passive energy-saving measures
Add to the above energy reductions by putting some passive energy-saving measures in place, such as:
- Light-blocking curtains or blinds – using black-out curtains on windows that let in the most sunlight can minimize the passive heating on hot days that usually require a lot of cooling.
- Double-pane windows – these are far better insulators than single-pane windows. While they are expensive to install, they last a long time and contribute significantly to temperature-control savings.
- Solar water heating – a residential solar water heater is likely to be sufficient for small business spaces. Accessing solar power to heat your water will also save you further electricity usage.
- Freshen up your seals – Particularly if you work in any older structure, old weatherstrip or caulk can significantly add to lost heat. So, check all exterior door and window frames, air vents, etc., and get any old or cracking sealing replaced for maximum efficiency.
4. Reduce your business’s paper use
Reducing paper waste is good not only for your bottom line but the environment, too. Some tips for doing this include:
- Implementing a default double-sided print and copy policy
- Reusing waste paper for notes
- Using electronic file-exchange services instead of traditional mail or courier services
- Removing your business’s name from direct mailing lists wherever practically possible
5. Encourage remote-working
Thanks to the pandemic, remote-working has skyrocketed. With employees working from home, business owners can save a lot of money on utility expenses, and it also:
- Reduces the amount of centrally-located commercial space you need to house your employees
- Reduces employee’s commuting costs
- Lowers utility costs resulting from less water and electricity usage
- Eliminating time lost to travel and to commute
6. Buy second-hand equipment or use coupons
Depending on the nature of your business, buying second-hand could include:
- Office-based technologies, such as copiers and printers
- Refurbished laptops, tablets, and smartphones
- Vehicles, such as company cars or delivery vans
- Packaging or assembly equipment
You needn’t rush out and switch everything to a used version, but the next time any equipment needs replacing, seriously consider buying used – many used equipment items are well-refurbished, work just as well, and come with warranties to cover the risk of making a second-hand purchase.
You can also access significant savings across the board when it comes to utilizing online coupons. Discount coupons are available to businesses for various expenses, such as licensing, software and recruitment costs, and hardware purchases, such as computers and laptops.
It pays to check leading online coupon sites for relevant discounts before making any significant purchases.
7. Pay invoices early
Many vendors will offer you a small discount when you provide to pay their invoices ahead of time. They may only be discounts like 2% or so, but so long as doing so doesn’t negatively affect your cash flow, these savings can add up across multiple outgoings.
8. Utilize social media advertising and encourage word-of-mouth marketing
Advertising on social media platforms can be significantly cheaper than traditional ad types such as TV or print. Social media ads also target your potential customers, making every dollar you spend work more effectively for you.
Additionally, social media marketing lends itself organically to increasing word-of-mouth marketing, but there are other avenues you can explore. Social sharing communities and referral programs where existing customers are paid to introduce new ones are just a couple of examples that can save you a great deal on advertising costs.
9. Invest in a Powerful POS System
For businesses that conduct transactions, manage inventory, or run any B2C operations, it’s likely that you’ll benefit from a point of sale system. Finding the right solution for your business can have a huge impact on your time efficiency, waste management, and, in the end, bottom line.
There are numerous ways that POS software can help cut costs for your business:
- Understand your products – Get more insight into how your products move. Learn the ebbs and flows of your sales, set promotions, and time orders.
- Manage your inventory – Keep your inventory management more organized and streamlined. A POS will help ensure you’re keeping everything in stock, but prevent you from having a glut of any certain product. This maximizes sales without overwhelming your warehouse.
- Prevent loss – A point of sale protects against needless waste in multiple ways – smart ordering protects against spoilage, and employee permission access protects against theft.
- Reduce processing costs – Get a POS that allows you to find the best credit card processing solution. Shop around and save money on every transaction.
Cloud-based subscriptions – Rather than buy expensive systems that constantly become outdated, get a subscription to a system that comes with automated updates and great customer support. This will save you thousands in the long run.
There are so many ways to save on operational costs when you put your mind to it, and these are just a few to give you a taste of what you can achieve.
While small changes may seem insignificant, collectively, adopting a frugal approach to assessing all outgoings can make a substantial difference to your bottom line.