Saving money is never easy, both for individuals and businesses. But in an uncertain economy such as the one we live in, even the smallest reduction in expenses is good news as it directly benefits the company’s profitability.
1. How Much Does It Cost To Run a Business
When planning your costs, the most important thing is not to underestimate the expenses, know what types of costs you’re in for and be aware they will likely increase as the business grows.
To begin with one-time costs, most micro businesses cost around $3,000 to start, while home-based franchises can cost up to $5,000. Then, you’re in for fixed monthly costs such as rent of approximately $2,750, website design and hosting that usually cost about $2,000, advertising takes about $5,000 and the biggest chunk goes to payroll. Fixed costs may eat up a high percentage of revenue during the first days, but as the business grows and scales up, their burden becomes significantly smaller. Then there are variable costs which are corporate expenses that change along with the output, such as costs of raw materials.
2. Ways To Lower Your Business Costs
The more you can reduce your business costs, the better your bottom line will be. Fortunately, there are many ways in which you could save money.
Cut production costs
Use smart devices to measure the efficiency of operations. Set a performance measurement system in place and assess it regularly to identify areas where you need to improve.
Your utility bill will play a significant role in your monthly expenses so make an electricity switch if you find a more affordable provider with a cheaper rate. The same goes for suppliers- let them know you are price-shopping. Look for the best insurance provider with the most competitive rate. For every single thing you choose to buy, negotiate to get the best deal.
Humanize your marketing efforts
Network more, advertise less. If 2020 has taught us anything, it’s that people care who is behind the label and what the brand stands for. No campaign can do what human contact can.
Use technology to automate what you can and optimize the use of your resources. Organize virtual meetings to save costs on business travel. Use technology to centralize your paperwork and enforce collaboration, while also avoiding several people doing the same task by accident. Use the cloud for storage to save on space.
Optimize your assets
Match your employee’s skills and experience with the right tasks. Number people should do figures and not sales. When a task that needs to be done is outside your range, outsource it to avoid wasting your resources and making an employee miserable.
Cut employee expenses, not employees
The pandemic resulted in skyrocketing unemployment rates. Yet, a few companies acted honorably by keeping all of their employees and reducing everyone’s working hours to get out of the crisis. When things get rough, save money by canceling free coffee and meals and not by canceling on people, who are your greatest asset.
Focus on quality, not quantity
At the end of the day, what sells your product is quality. A consumer buys your product because it is the perfect solution to a problem he or she has. A satisfied customer will keep coming back and act as your ambassador by bringing you more loyal customers. Higher quality leads to a good reputation and allows you to charge a premium price. In other words, quality brings a higher revenue and improved bottom line.
Make your business greener
In case you haven’t heard yet, going green saves you green. Making your business greener will not only save you money as you will undoubtedly consume less energy, but it will also improve your business reputation. Consumers are becoming more aware and they are willing to pay a premium for ethical and eco-friendly brands. Making your business greener equals to making a powerful statement that can get you loyal consumers.
Takeaway – At the end of the day, a business cannot survive unless it is profitable. Your job is to ensure the sales of your product or service, but it’s just as important to stay on top of your finances. Identifying ways to save money does not only protect your profitability, but it is also your safety net to survive the storm- like the one we’re in now.