10 Ways to Cut Costs for Your Small Business
More businesses are struggling to remain profitable in these tough economic times. Make sure your business is running as lean as possible with these 10 tricks for cutting costs:
1. Move your IT to the cloud.
An infographic by ProfitBricks shows that a traditional data center costs about $120,000, while the same can be accomplished in the cloud for less than $47,000. Cloud computing is also easily scalable, meaning you only pay for what you need, when you need it—no big annual packages or entire software suites to buy when you won’t use it all.
2. Go virtual.
Office space is nice to have, but think of the vast amounts of overhead you could save by allowing your employees to telecommute. According to Harvard Business Review, telecommuting boosts productivity by 11 to 20 percent. Gauge your human capital wisely and make smart decisions when it comes to working arrangements.
3. Outsource nonessential functions.
As a small-business owner, you can capitalize on freelance talent by hiring contractors for part-time or short-term tasks. Even top-level talent can come cheaper on a consulting basis than as a full-time employee. Outsourcing nonessential, ongoing functions, such as payroll, to a third-party agency or administrative tasks to a part-time virtual assistant are also cost-cutting measures worth considering.
4. Eliminate expensive software costs with open-source applications.
There are a number of open-source or free applications that replicate the processes of pricey software. Examples include FreshBooks for accounting, Google Docs for file sharing and collaboration, OpenOffice for word processing and spreadsheets, and Kompozer for design. Look for a free and fully functional application before investing in an expensive software suite.
5. Use credit to your advantage.
Use credit cards that offer rewards points for discounts on future purchases or cash back. If you travel frequently, a credit card offering frequent flyer miles can save you money on airfare. Use the same hotel chain to accumulate hotel points for future savings.
6. Cut back on utilities.
Sam Lazarus of ServiceMaster says he’s been able to reduce his utility costs by eliminating unnecessary spending, such as an extra mobile line, and calling around to find the best deals from vendors such as trash hauling and insurance. Lazarus reports cutting costs 35 to 60 percent across services such as telephone and insurance.
7. Use space efficiently.
You likely have office supplies stored somewhere, and if you’re a product retailer, you have space for stock. Making efficient use of space means you can fit more supplies in the same cubic footage. This saves money on warehouse storage and allows you to keep more products on hand, eliminating the added shipping costs that come with frequent reordering. Rent out or sublet any unused office space to a consultant or small agency.
8. Ask for discounts from regular vendors.
Most small-business owners find themselves doing business repeatedly with the same vendors for predictable service. You won’t get a discount unless you ask for it. Vendors may appreciate your loyalty and cut you a break via a preferred customer discount.
9. Hire interns for ancillary job functions.
Internships are either unpaid or paid at a rate lower than standard industry rates and create a win-win solution: You’re providing valuable work experience for a student, and you’re saving money through the lower wages. Interns assisting some of your most valuable executives can handle some of the more mundane tasks, improving overall efficiency and providing more time for your core staff to focus on important job functions.
10. Boost value perception with higher prices.
Sometimes a straightforward price increase can actually work to your advantage. Consumers tend to associate value with price points, so higher prices leads to the perception that your products or services are higher quality than those of your competitors with lower prices.
Gwen Jimmere, CEO of natural hair and beauty product line Naturalicious, says she’s been forced to raise prices and discontinue benefits such as free shipping to remain profitable. As long as the customer perceives the value is equal to or greater than the price paid, customers will continue to buy.
Still, there are still plenty of options for cutting costs for your small business without raising prices. Analyze your options, your consumer base and the perceived value of your products to determine whether cost-cutting measures or increased prices will be most beneficial to your small business.
Looking for more ways to save money? Check out these financial articles.
Angela Stringfellow is a freelance writer, social media strategist and complete content marketing junkie obsessed with all things Web, written word and marketing. Angela blogs via Contently.com.