Increasing revenue is a frequent thought on entrepreneurs’ minds. In reality, there’s often an easier way to generate more income: cutting costs. Reduce your business expenses and you’ll be able to achieve better cash flow and profitability.
The larger the business, the higher the number of useless costs that accrue. As companies grow, it can be challenging to track and take into account the small costs that crop up but have the ability to snowball into bigger expenses. This is especially true when a business is generating enough revenue to cover them all.
The big value of reducing expenses, however, is twofold. First, it will better prepare your business for changes in the market. If a recession hits, having fewer costs will help you remain afloat, even with lower sales. Second, fewer costs make your business more valuable. More income is always a positive thing. When pitching to investors, they’re often interested in not just revenue, but also income and how it’s changed over time.
Consequently, putting an effort toward reducing expenses is a good use of an entrepreneur’s energy. Here are five steps you can take that will reduce your business expenses.
1. Use more software.
Look at the tasks your employees are taking on. Do they need to be doing those tasks themselves? Or, would it be cheaper to find a software product to do that work? In many cases, there’s software that can accomplish the same task more efficiently. This will enable your employees to spend their time on higher-value activities.
For example, if you have an employee spending the bulk of his time monitoring your leads in Excel, it would be advantageous for you to outsource with a small CRM product.
The number of software products — and their corresponding capabilities — is increasing. Automating the most repetitive tasks on your company’s plate with software can pay large dividends in terms of time, energy, and focus. To ensure you’re making a smart investment, do your due diligence. Compare offerings based on functionalities, ease of use, and price. That includes reading the fine print to determine whether your costs go up per user as you scale.
2. Outsource more work.
When companies need work done, a common step is to hire another employee. This can make sense. But, it depends on the type and amount of work needed. Often, it can be cheaper to bring on contract or freelance workers. They don’t require the overhead of an employee who requires benefits and allocated workspace.
Outsourcing can take on various forms: You can pay someone to take on an individual design or engineering project, to bring in consulting knowledge and speed up a process for your team or to help out on an as-needed basis for overflow work. For administrative tasks, you can utilize a virtual assistant.
3. Cut nice-to-haves.
In addition to finding cheaper software alternatives, you should make sure you’re no longer paying for products or licenses you don’t use. Dig through your credit card statements or use a software spend management service like Siftery or Zylo. These can automatically pinpoint places where you could be saving money, and they enable you to track your spending on a regular basis so you can reallocate as your business demands.
It’s easy to overlook services you might have signed up for months ago and abandoned (or never fully adopted as a team). Many businesses also carry products or services with overlapping capabilities, so any time you onboard a new software package or vendor, determine whether you’re duplicating your efforts elsewhere. It’s a great trigger to cut costs and determine what provides the strongest ROI for your team.
This can extend beyond process-related spend. You may be able to renegotiate the rent on your office or the interest rate on your loan; you can also look at what’s thrown out each month in your break room or overstocked in your supply area to determine where your costs are getting sunk without a payoff.
4. Hire interns.
Interns are another great way to reduce your business expenses. When you need work done in-house, interns can be an efficient and cost-effective solution if someone on your team has the bandwidth to train them.
There are college students all over the country constantly looking for jobs, both during the summer and school year. Finding someone who can come in and do the work at a lower rate will create a mutually beneficial experience — and may even lead to your next hire when your team’s ready to expand.
5. Stay updated on the industry and others in your role.
One of the best ways to save money in both the short and long term is to pay attention to industry trends. Step one is developing relationships with others in similar situations, and they don’t need to be in the same industry for this to be effective. When you have a network of people who are also thinking about ways to run lean businesses and save money, much of your work can be cut simply by learning about their findings and techniques and applying them to your own company.
Step two involves keeping up with industry trends and best practices. There are countless thought leaders in every industry sharing the best tactics, technologies, and ways to save money. Staying updated on these shifts will both expose you to methods for cutting costs and also reveal tricks to get — and stay — ahead of the competition.
Stay On Top of How to Reduce Your Business Expenses
By staying informed and taking a regular inventory of what your team has — and needs — you’ll be able to continuously make efforts to save money. Doing so will help you clear out extraneous costs, create a money-savvy culture and capitalize on new technologies as they get cheaper. The small investment of a few hours can end up dramatically increasing your company’s income.