If you’re a small business owner, you're always looking for ways to improve your company's financial outlook. You can't always control how much money you make, but you can control your spending.
Fortunately, don’t need an MBA or financial forecasting skills to set your small business up for success. Here are 14 ways to cut costs and save money for a profitable future.
Begin With a Budget
It can be challenging to cut costs if you don’t know exactly how much money you are spending each month.
Before making any changes, take the time to sit down and figure out what’s going where. This includes:
- Money coming in: Regular, reliable income. If you are not sure, base your projections on the month with your lowest income just to be safe.
- Fixed business expenses: This includes things like rent and employees (if any).
- Fluid costs: Optional or occasional expenses that can be negotiated or eliminated.
Once you have this number, look at areas that can be tweaked or adjusted. Don’t skip opportunities to cut a few dollars here or there. They add up quickly.
Many small business owners are afraid to negotiate for fear they will alienate suppliers or other businesses. While building a network and supporting other small business owners is an important part of your success, don't be afraid to ask for better terms. This might include asking for discounts for cash payments, larger orders, or long-term contracts.
If you have been eyeballing a new piece of equipment for a long time — one that can help you expand your operation or increase production — consider going secondhand. Used items are often in excellent shape and can be had for half the price.
Focus on What You Know
Many small business owners think they can save money by doing it all. But if you are not an accountant, reconciling your monthly accounts takes up precious time that could be better spent on your area of expertise. Instead, consider outsourcing. It’s an extra expense, but the time it saves is worth the money you spend.
Find Your People
In this era of the Great Resignation, many people are turning to freelance or contract work rather than getting burned out at a run-of-the-mill office job. This is a prime opportunity for your small business to save on expenses, including labor costs and expensive benefits programs.
Before hiring a full-time worker, consider whether freelancers and contract workers could handle what you need. You can often find specialized, flexible professionals willing to contribute to your company while you avoid the costs associated with officially hiring them.
Eliminate the stress of the commute, as well as the expense of maintaining an in-person office, and allow employees to work from home. This immediately cuts out the expense of office space rental.
Plus, if you decide to hire a new worker, your talent pool won't be geographically limited. You'll get more applications, and you'll fill open positions faster — allowing you to get back to focusing on the parts of the business that make you money.
Changing your light bulbs to energy-efficient lighting and participating in recycling programs lowers your utility costs. Using a smart thermostat and improving your insulation can also help conserve energy. The bigger your office space, the more money you can save with upgrades. In some cases, these minor adjustments also qualify you for tax credits.
Let Computers Take Over
Automating your processes using artificial intelligence (AI) or other technologies reduces labor costs and improves your efficiency. In some cases, AI tools handle the most mundane tasks to free up time for more important things.
Keep Up With Repairs
Ben Franklin had it right: An ounce of prevention is worth a pound of cure. Conduct preventative maintenance on equipment to avoid an expensive repair or budget-busting replacement.
Market Like a Pro
Are you still paying for marketing that utilizes traditional advertising methods? Many modern businesses ought to skip the direct mailer in favor of social media marketing and email campaigns for a better return on investment.
Consider implementing a referral program, too. This type of word-of-mouth marketing can be remarkably effective with a minimal cash outlay.
Cash In at Tax Time
Small businesses are eligible for a raft of tax deductions. If you are lucky enough to live in a state that doesn’t collect a state income tax, you’re starting ahead of the game. But that’s not all you can cash in on.
Some (but not all) potential deductions involve:
- Office supplies
- Depreciation of large assets
- Travel expenses
Keep in mind that if you are planning on relocating your business, moving expenses are not tax deductible unless you are a military member. This may change in 2025, so ask your accountant if you aren’t sure.
Make Sure You’re Covered
Regularly check on your business insurance policy to make sure that you're not only covered — but that the rate you're getting is the best that's out there. If you like your current insurance company and have been with them for a while, it doesn't hurt to try to negotiate a rate reduction.
Add a Consultant
If the trees of your business are too dense for you to see the forest, consider hiring a consultant to analyze your business, its productivity, and areas where you can cut costs. This can be particularly helpful if you have been in business for a while and have seen your profits plateau (or decline). Consultants look at your business with fresh eyes and help you bring systems and processes up to date.
Eat the Elephant
Putting yourself on a budget, improving money management, and cutting costs can be a daunting task. The best way to eat the elephant is one bite at a time. Start with small steps and expand as you are ready.
The Bottom Line
In the realm of small business, finding ways to cut costs and save money is essential for long-term sustainability. These 14 strategies provide actionable solutions to optimize your financial resources and boost profitability.
From renegotiating vendor contracts to embracing technology for streamlined operations, each approach offers practical ways to trim expenses without sacrificing quality.
By implementing these cost-cutting measures, you can free up capital for growth initiatives, increase your bottom line, and navigate economic challenges with resilience.
Take control of your business's financial health and leverage these strategies to create a lean and efficient operation that thrives in the competitive landscape.