In a struggling economy, small business owners tend to suffer the most. Most owners either quit or struggle through the tough times for a while before their businesses collapse. However, instead of quitting, there are ways that you can use to increase your business profits, improve work efficiency and manage to save money. If the aim is to ensure that your business stays afloat even in the midst of tough times, then you need creative new ideas to save more.
All you need to do is to apply these cost-saving ideas to your small business and you will be able to improve your savings, as small business owner. In this article, you will learn about the 10 most effective cost-saving techniques for small businesses and how you can apply them to your business operations to reduce expenses and increase profitability.
Cost-saving ideas for small business
In today’s tough economy, there are some effective cost-cutting techniques and tips for small businesses that can be helpful when it comes to saving money and increasing profits earned from the business. Here are 10 cost saving ideas you can use as a small business owner.
Lease equipment
You can start by leasing equipment instead of buying them. This is especially in cases of expensive equipment that you need to use in your business, once in a while. By hiring equipment, you will avoid the high costs involved in making a purchase. Also, leasing helps you save money that you would have otherwise spent on repairs, upgrades and maintenance.
Buy used equipment
In case you need to buy equipment, choose to buy gently used equipment instead of new ones. Based on your business, you can buy used equipment such as printers, copiers, refurbished smartphones, tablets and laptops, vehicles, storage equipment, packaging equipment and even furniture.
This does not mean that you cannot buy new equipment. It is just cost saving to consider gently used equipment, especially when you want to replace the equipment you already have.
Control location costs
In case you start your business in a city or state that is not affordable for small businesses that are just starting or still growing, you will need to go through the troubles of finding a way to control the location costs so as to maximize your profits. Instead, you can start by locating to a lower-cost region where location costs are more manageable.
Consider the commercial rent you pay for your business to continue occupying a particular space. You can try negotiating with your landlord for lower rental rent for longer-term lease. You can choose to rent out Class B or C office space instead of high-end Class A space. Another great way you can save on the rent is by considering leasing a co-working space for your business. Co-working involves businesses operating either independently or collaboratively in shared office space. This is possible and efficient if your business does not need much space to operate.
Ensure that you also consider the taxes and labor costs. Try and educate yourself on local sales, income and property taxes to ensure you know the deductions you will be experience from your business to pay your taxes. Ask for help from a licenses tax professional if need be. If your business requires intense labour, ensure that you consider the local minimum wage and the overtime regulations that have been set in place. This way, you can control the labor costs for your business.
It is advisable and cost-saving for you to move and rent a less expensive commercial space, especially if you are not locked in a lease. If you are already bound in a lease contract, try and negotiate with your landlord before the renewal to get a better deal. Also, you can ask your landlord for upgrades to your commercial space, as agreed upon in the lease contract, so as to save money you would have otherwise spent on handling the upgrades yourself.
Negotiate with suppliers
When it comes to your suppliers, ensure that they provide you with quality goods or services. If this is the case, then instead of changing suppliers so as to reduce your business costs and expenses, you can try negotiating with them to lower their prices. You can ask for a volume discount where you will receive a lower price for bulk goods.
Apart from that, you can negotiate with them to consider giving you longer payment terms. That means, if you pay your invoices within the agreed payment period, you can get a discount. Another way of negotiating with your supplier(s) is by comparing prices among different suppliers to ensure that you get the best deal from your supplier.
Finally, as a small business owner, you can consolidate your business with one vendor instead of using multiple vendors for the same products. With one vendor, it is easier for you to get a bulk discount or negotiate for a better price.
Use smart thermostat
The whole idea is to save money in your small business. Such an example is investing in smart technology that will enable you save money when it comes to your electric bill. It is best to use a smart thermostat that can automatically adjust to suit your temperature needs. With a smart thermostat, you are guaranteed reduced energy consumption, lower electricity bills, and comfort in the office.
Once you get a smart thermostat, set a program that will enable the thermostat to adjust the temperature level based on whether or not there are people present in the office. There will be no energy wasting; hence more money saved on energy bills. With a smart thermostat, you will efficiently save on costs without compromising the heating and air conditioning of the office.
Consider passive energy-saving measures
Use passive energy-saving measures that will help to complement the cost being saved through the work done by your smart and programmable thermostat. Other energy-saving measures you can utilize in the process include reducing climate control, reducing your company’s carbon footprints and regulating your lighting system’s workload.
You can use double-pane windows as they are better insulators as compared to single-pane windows. They will keep the heat in during winter and the cool air in during summer. Buy light-blocking blinds and curtains to reduce the light and heat that enters your office on warm days. This way, you reduce the use of air-conditioning. Also, you should fix tight seals on exterior windows, air vents and door frames to prevent heat loss on cold days.
It is best to use solar water heater as this will ensure that you electricity bills are within budget. By using the power of the sun to heat your water workplace’s water supply, you become more sufficient and end up with more savings. Also, use LED lighting as it is more efficient, environmental friendly and will save you money on your energy bill.
Reduce paper usage
As a small business owner, you can lower storage costs by going paperless or reduce the paper usage. Printing and storage can be expensive and that means going paperless is cost-saving. You can reduce paper usage by
- Scanning your documents
- Printing and copying double sided
- Using secure electronic file exchange services instead of courier services
- Reusing waste paper for scratch or noted
- Tightening margins or reducing font sizes when printing
- Storing your documents electronically
- Switch to e-bills and paperless statements
- Using an online payroll service instead of paper checks (also helps to prevent fraud)
- Faxing online
Switch banks
When it comes to banks, they are always looking for ways charge extra charges. As small business owner, you must stay alert and avoid high banking fees, ATM surcharge, bounced check fees, and debit card fee. You can also choose to switch banks so as to save your company money. Ensure that you opt for banks, usually online-only banks, which have low to no fees.
As a small business owner, avoid banking with national banks and use regional banks as they have lower fees and have more personalized services. With a regional bank, you are likely to get rewards that you can use to add products or supplies to your business. These banks also tend to offer better business loans for small business owners with good credit score.
- Having a lower interest rate on your loan, due to switching banks, is definitely a cost-saving technique that you need to survive this tough economy.
Consider telecommuting
The pandemic forced most businesses and companies to embrace telecommuting. It is a great cost-cutting technique that you should consider as a small business owner, if possible. Working remotely from home will have a great positive impact on your employee’s morale as this arrangement is flexible and guarantees high productivity.
You will be able to save more if you consider telecommuting and:
- Reducing utility costs such as electricity and water
- Reducing the amount of work space needed; hence, lower rent costs
- Reducing travel and commuting allowances needed by employees
- Reducing time wastage and improving work productivity
Taking your business entirely virtual can also be another option, especially if your business does not require a physical location. People can work from home and you can communicate with everyone using telecommunication tools such as email, phone, chat and video apps. With options such as voicemails, forwarding and call centers, you will be able to effectively communicate with your customers too.
Review your expenses regularly and cut non-essential expenses often
The final cost-saving idea for your small business is to remember to take time to review your business expenses regularly. This way, you can identify expenses that you need to cut so as to save more money. Since the areas that you need to cut costs change over time, regularly reviewing your expenses will help you stay on track on what you need to cut to thrive in your business.
You can review your expenses by:
- Comparing your monthly costs to your monthly budget
- Tracking your business spending habits using an accounting software or app
- Reviewing your monthly bank and credit card statements.
- Checking your inventory and removing items that are not selling
- Consolidating your communication tools, especially when embracing telecommuting
- Using a single vendor for your needs to avoid extra expenses and save money.
Cutting expenses includes eliminating areas you do not need or adjusting the costs of those areas. For instance, if you spend too much on supplies daily, you can cut costs by buying in bulk so as to get better prices and discounts. In other cases, you might need to eliminate your advertising strategy due to the costs and adopt a more affordable way of marketing your business. Whichever option you choose, ensure you review, analyze and then cut non-essential expenses.
Conclusion
Whether your small business is already in existence or is just starting up, you need to consider your economic environment so as to find a way to thrive and save money. Use the 10 cost-saving ideas mentioned in this article in your business or company if you wish to increase profits and save more money. As a small business owner, you are likely working with a limited budget. So, using these cost-saving techniques will definitely go a long way in ensuring that your business keeps running smoothly and efficiently.
Ingrid Maldine is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Ingrid’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Ingrid has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Ingrid has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.
