Costs Your Business Can Manage Before You Cut Staff
If you’re looking at the business’s books, and things look like they’re leaning far too much towards your expenditures rather than your income, then, aside from finding ways to increase your revenue, you’re naturally going to look at costs to cut. Since labor costs typically consume the largest portion of your budget, it may seem logical to start by reducing labor expenses. However, this approach can lead to understaffing, which in turn prevents you from delivering your products and services to the desired standard.
So, where should you look first? That’s what we’ll explore in this post.
In This Article:
4 Ways to Lower Your Business Costs
Take a look at these four things first to see if you can lower costs without doing anything drastic.
Get In Touch With Your Vendors And Suppliers
Supplier costs can inflate a lot over time, so you should first get in touch with them to see if you can renegotiate your prices, delivery fees, or order quantities. A lot of suppliers might be willing to cut you some slack if you’re able to demonstrate your willingness to be a long-term, reliable customer. You may also want to look at what outsourced services you can start bringing in-house, too.
Take A Look At Your Utility Costs
The bigger your workplace is, the bigger your utility costs are going to grow as well. Energy, water, and internet expenses can all expand greatly, so you should do what you can to reduce them. This can include replacing old inefficient appliances, updating to low-flow fixtures in washrooms, and checking your internet provider’s competition for better deals. Full-scale business utility auditing can help you get a better idea of how much of your expenses go towards your utilities, and what you can do to reduce them. You may be able to run a much leaner ship without having to lose anything if you can find the right providers.
Reassess Your Marketing Expenses
Marketing your business can be very important towards maintaining its level of growth, but not all marketing strategies are the same. Some, such as advertising, can get very expensive. Make sure that your marketing strategy offers real return on investment, with proof that you’re generating the revenue to justify it. Consider weighing your strategy a little more towards low-cost, long-term methods such as content marketing, as well. Direct advertising tends to work best in bursts, such as calling attention to currently running sales.
Optimize Your Inventory
A business that runs on inventory, be it a retail store with its stock, a restaurant with its ingredients, or a manufacturing line with its materials, needs to ensure that excess inventory is kept to a minimum. Not only might you be spending more on inventory than you need, but any excess increases the risk of waste due to damage, loss, and spoilage. Analyze sales patterns and use forecasting tools to avoid over-purchasing. Sell or repurpose obsolete products and materials if you’re able to claw back some of those costs, too.
It may be the case that you do eventually have to cut your labor costs regardless. However, with the steps above, you can do everything you can to reduce how much of an impact you have to make as you do so.
