Thinking about ways to reduce business expenses? The good news is that there are plenty areas where one can find cost savings for their business.
But can you always cut costs without hurting your company? Er, no. While any expense can be eliminated, that doesn't necessarily mean every expense should be.
Those doughnuts you buy the staff every Friday as a morale boost? Cutting that expense could probably save you a decent bit of money a year—plus those empty calories probably aren't helping your employees' health and could be contributing to higher health insurance premiums.
But your staff could also be stunned that you've gone from the awesome boss who brings in doughnuts to the cheapskate who can't even buy their employees a tasty treat. Those doughnuts may be paying for a lot of goodwill among the staff.
Sometimes, when you reduce business expenses, it can bring with it unintended, unpleasant consequences—and sometimes it can improve both your bottom line and how your business functions. If you want to reduce business expenses that lead to more of the latter, consider these tactics.
1. Audit your company's expenses.
Taking a look at your business's expenses can be a logical first step whenever anyone wants to reduce business expenses. You can certainly help your business budget by cutting obvious expenses, like switching from business class to coach. But if you don't audit your expenses, you may miss hidden, less obvious expenses.
Jason Patel, founder of Transizion, a college prep company headquartered in Washington, D.C., says that a lot of business owners fall in love with the bells and whistles revolving around their business—“features that we think are cool but provide no real value to the customer."
—Darren Schreher, digital manager, INTO THE AM and iHeartRaves
That's where an audit can come in handy, Patel says.
“It takes a lot of self-awareness to do this. No feature is so holy to keep if it's a resource drain; everything should be customer-focused. Business owners should keep that in mind," he says.
Patel offers up an example of what he found during a recent audit.
“My college prep company provides online, individual boot camps to students," he explains. "We were paying good money for a well-known online portal that allowed us to share documents, use an interactive chalkboard and write notes on documents that we shared."
But after auditing their expenses, Patel says, “my team came to the conclusion that this portal was not only costly, but there were more efficient and cost-effective options available."
The company switched to another portal, Patel says, and ended up saving $800 a year.
2. Automate processes to reduce business expenses.
Schreher says the companies' online return process used to be very clunky and full of hassles for customers and employees.
“Our return process used to be very costly with a lot of manual labor," he says. "Since changing over to a more automated process, it has reduced costs, increased our profits and provided a much better return process for our customers."
And the company didn't need to let any of their 55 employees go.
"We've shifted them to other tasks in the warehouse that provide more value," he says.
3. Insource to reduce business expenses.
You hear a lot about outsourcing being a way to reduce expenses. But sometimes doing what you were paying another company to do can help your bottom line without hurting your brand.
For instance, Scott Amyx of Amyx Ventures, an industry-building venture fund in New York City, says that he has cut “the hefty cost of PR."
Public relations firm owners and executives may be cringing right now, and would probably object to PR being insourced. But different strokes for different companies, to paraphrase the old saying.
To reduce business expenses associated with public relations, Amyx and his team does all Amyx Ventures' PR, from press releases to conversing with reporters. Handling public relations by yourself is a lot of work, he concedes.
Still, “this is a significant operational expenditure reduction with nothing but upside in my opinion," he says.
Again, every business is different, and what works for Amyx may not work for another company. Even Amyx admits that having a public relations company on hand may be valuable for some companies.
“The value that certain PR agencies have is their long-standing relationships with the journalists and producers," he says. “Especially for national media, a pre-existing working relationship means the difference of a reporter opening, reading and responding to a pitch versus another random email to add to the long list of inbound spam."
Taking this beyond the pros and cons of hiring a PR firm, maybe instead of a cleaning service, you hire an on-staff custodian. Maybe instead of outsourcing your IT or HR needs, you hire someone who specializes in IT or HR. You can take your content and social media marketing management in house instead of working with a marketing company.
Insourcing may be a great idea for your company. So just as you should audit your costs, you should audit your ideas to reduce business expenses.
4. Barter and share resources with others.
Bobbie Carlton is a serial entrepreneur based out of Lexington, Massachusetts. Carlton owns public relations firm Carlton PR & Marketing, as well as events marketing company Mass Innovation Nights and Innovation Women, an online speakers' bureau for entrepreneurial women.
“I've created a number of systems to save the businesses money. It's a specialty of mine," she says.
Two ways that really have made a difference has been bartering and sharing. Carlton trades services with a law firm and with an IT services company, and she shares offices with another company.
Sharing office space won't be practical for every businesses, but some companies with a small staff and footprint may want to consider it. Even some retailers have managed to get away with the store within a store concept.
Consider trying any ideas you have to reduce business expenses. You'll want to proceed carefully, however, in case there are negative consequences.
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