Are you looking for ways to save money on business expenses? If so, you’re in luck! This blog post will discuss various strategies that small business owners and new entrepreneurs can use to reduce their spending. We’ll cover everything from reducing your energy costs to finding cheaper office space. So whether you’re just starting or running your business for a while, read on for some valuable money-saving tips!
First, consider, where are you now?
If you’re stuck in business in a downward spiral of out-of-control costs, don’t delay. Start interviewing coaches. Mainly, find a business coach.
A small business coach is a professional who can help you save money and improve your overall financial stability. When interviewing coaches, make sure that they have a very particulate skillset for helping you
1) first, cut expenses
2) second, increase sales
3) and finally, help you change your money mindset for the better
Analyze your profit and loss statement monthly to find more opportunities for saving money
The profit and loss statement, also known as an income statement, shows a business’s financial performance over a specific period. It lists revenue and expenses for the month, which can help you identify areas for saving money. Analyze your profit and loss statement every month to make and save money. Look for opportunities to reduce business costs in marketing, rent, payroll, and other operating expenses. You may also be able to negotiate better rates with your suppliers or increase sales to boost profits. Above all, keep in mind that small businesses should continuously track their spending carefully – every dollar counts!
After analyzing your monthly profit and loss statement, take action to improve your bottom line. Implement some of the money-saving tips mentioned in this article, and you’ll be on your way to reducing your expenses.
First, Pay attention to the cost of goods sold to avoid sharp cost increases.
Lowering costs can be tricky, but entrepreneurs must do everything to keep costs down. By being mindful of your cost of goods sold, you can avoid sharp increases in expenses. By getting organized and using technology wisely, you can reduce your spending on services and other overhead costs. Additionally, negotiating better rates with vendors and service providers can save you a lot of money in the long run.
In addition, a small business’s budget can help.
There are a few different things that you can do to create a budget for your small business. The first thing you need to do is track your expenses for the past month or two. This will give you an idea of where your money is and what areas you can cut back on. Once you understand your spending habits, you can start creating a budget that works for your business. Many online resources are available to help you get started, so don’t be afraid to do some research.
Consider hiring independent contractors.
There are a few ways to help reduce your labor expenses by hiring independent contractors. You won’t have to pay as many benefits since independent contractors have their businesses and aren’t considered employees. Additionally, you may be able to save on taxes by classifying some of your contractors as self-employed. Finally, independent contractors can often be more cost-effective than hiring full-time employees. You won’t need as much office space! Remote workers are great!
Do your research, though, because there are also a few things to watch out for when using independent contractors. Sometimes it backfires when we want to cut back on employee costs. For example, make sure that they are qualified for the job and will be able to complete the work.
Many businesses ask me this, should I hire local college students?
There is no definitive answer, as it depends on various factors. But here are three pros and cons to consider:
– College students can be an affordable resource for your business.
– They may have fresh ideas and be eager to learn.
– They can help you with business tasks such as data entry, customer service, or social media marketing.
– College students may not have the experience or skills you need.
– If they’re not available during the summer months, you’ll have to find someone else to cover those hours.
– There’s always the potential that they will leave your company after a short time.
Apply the Lean 5S method to save time and money
The Lean methodology is a system that helps companies become more efficient and effective by identifying and eliminating waste. Time is money, right? The Lean philosophy is based on continuous improvement or kaizen. There are five steps in the Lean process:
Sort – Separate what’s needed from what’s not.
Straighten – Organize what’s left to be easily accessed and used.
Shine – Keep everything clean and neat. Be proud!
Standardize – Make sure the new process is followed every time.
Sustain – Maintain the improvements you’ve made.
Apply Value Stream Mapping to find wasted time in your processes
Lean is a philosophy and methodology for the continuous improvement of processes. I loved my Lean Tools Certification Class! I’d suggest learning more and applying it to your business. Lean has five core principles: identify value, create flow, standardize work, optimize the sequence, and sustain the gains. The Lean philosophy is based on the idea that if you can see what creates value for your customers, you can eliminate everything else. This means that you focus on creating value for your customer and removing waste from the process.
Discover what your customers want, and don’t overdeliver
Scope creep can kill a small business. If you’re not careful, those little add-ons and changes to your project can quickly turn into significant expenses that you didn’t plan for. This can ruin your budget, but it can also delay your project and cause quality problems.
To avoid scope creep, set clear boundaries for your project from the beginning. Make sure everyone involved understands what’s expected of them and what’s off-limits. Be prepared to say no to requests beyond the project’s original scope. Charge the customer for the additional work. And, don’t take action until you have a signed agreement. If something changes partway through, update everyone involved so they don’t start working on something already done.
Cut Business Costs to Help with Cash Flow
Reducing expenses can help with cash flow by freeing up funds used elsewhere in the business. It’s important to remember that not all reductions will immediately impact the bottom line – some may take time to realize savings. But careful planning and execution can lead to significant cost savings over time.
For example, installing solar panels might save you $20,000 over three years. So don’t count on that $20K worth of cash next month. Keep looking for opportunities to cut costs that can give you money today versus tomorrow.
Ensure all your expenses are labeled and not coded in a miscellaneous account.
One of the most prominent problems entrepreneurs face is how to keep expenses low. This becomes even more difficult when you have miscellaneous expenses that are not easily categorized.
You may think you’d remember what you swiped your card for, but I guarantee you will forget. Recode your expenses monthly when you’re reconciling your accounts.
Mismanagement of these expenses can lead to more considerable losses in the long run, so it’s essential to take some time to understand and address this issue.
Renegotiate overhead costs such as telephone and internet
A small business owner might hesitate to negotiate for a lower rate with their service providers, but there’s no need to feel bad! You should see it as an opportunity to save your business money.
Here are a few tips for renegotiating overhead costs:
– Renegotiate your telephone and internet bills. Many service providers will give you a discounted rate if you ask for one.
– Ask about group rates for services like shipping and mailing. Often, businesses can receive discounts if they band together and purchase services in bulk.
– Compare prices on office supplies and equipment. It never hurts to shop around before making a purchase, especially if you can find a better deal elsewhere. Your local office supply store likely has more freedom to offer you discounts based on your usage.
Negotiate discounts with frequently used vendors. I liked to estimate my raw material orders based on signed contracts and upcoming jobs. That’s why order trend analysis is critical.
Look for discounts and group rates on insurance policies.
Look for discounts and group rates on insurance policies. Insurance is a necessary expense for any business, but there are ways to save costs on premiums. Ask your broker about discounts for members of professional organizations or if you can bundle your policies with other businesses.
Hire a Payroll Company
Employing a payroll company can save you time and money and avoid what could be costly mistakes. Time-consuming administrative tasks are outsourced to an expert specializing in the payroll process. This frees up your business’s staff to focus on revenue activities instead of spending valuable hours processing employment forms.
Employing a payroll company can save you time and money and avoid what could be costly mistakes. Time-consuming administrative tasks are outsourced to an expert specializing in the payroll process. This frees up your business’s staff to focus on revenue activities instead of spending valuable hours processing employment forms. ~Sean McGinn, ADP
Research different energy sources
Research different energy sources and providers to find the best rates. Some energy companies offer lower rates for businesses that switch from traditional energy sources to renewable ones. Look into solar energy if you have a sunny location and a big roof.
“Commercial solar projects can be cash positive day 1! With Federal, State, and Utility incentives, plus the ability to deprecate the entire project in year one, your company will see real savings and tax benefits. There are programs from a simple reduction in your current electric rate to building a sub-metered system for you and your tenets, if applicable, that will pay you back for years to come.” ~George Smith, Rightway Energy Group
Downsize your space
Downsizing your office space is a great way to reduce your expenses. You can save business costs on rent, utilities, and even office furniture by scaling down to a smaller space. If you’re currently in the market for a new office, ask about discounts for signing a longer lease or prepaid rent. And don’t forget to negotiate with your current landlord – you may be able to get a lower rate if you agree to stay put for another year or two.
Use technology to reduce costs.
There are many ways that you can use technology to reduce expenses. However, I don’t recommend buying used computer equipment. Consider investing in new computer equipment if you have old, unreliable computers. And make sure to have a cyber security expert on board.
“You’re saving money in the long run by avoiding potentially dangerous mistakes. To combat the constantly evolving threats from cyberattacks, businesses need to implement a plan involving all stakeholders, from c-level executives to entry-level employees and all departments in between. It will take education, participation, and collaboration to ensure your business is protected from the bad guys behind the computer.” ~Scott Gombar, Nwaj Tech
Also, using cloud-based storage and software programs can help reduce the amount of office space and equipment you need, lowering your rent or utility bills. By utilizing technology in these ways, small business owners can significantly reduce their operating costs and improve their bottom line.
Revisit your traditional advertising methods
Traditional advertising costs include printing materials, postage, and trade show expenses. But there are a lot of creative ways to cut conventional advertising costs. For example, you could print your marketing materials yourself or use an online printer to get a lower price. You could also save on postage by sending email newsletters instead of printed mailings. And if you’re going to participate in a trade show, make sure to plan and choose one within driving distance to avoid travel costs.
With this said, you should never skimp on your promotional materials. Quality materials will help you stand out from the competition and reach more potential customers. However, there are ways to cut back or reconsider your promotional expenses. Here are a few tips:
-Work with an expert who can help you choose suitable materials for your specific need. Don’t just aim for a low-cost tchotchke salesperson.
– Invest in high-quality products that will last longer. This will ensure that you get the most for your money.
– Look for deals and discounts online or through local suppliers.
– Consider using recycled or eco-friendly materials whenever possible.
– Be creative! There are many affordable ways to promote your business without breaking the bank.
Time management should never be overlooked.
When you’re looking to cut corners, time is always an essential factor. Ensure that you are looking to be more efficient with your time in the office and out of it! There’s no need for overtime if you or an employee can accomplish the work within a 40-hour week. Utilize technology to take care of simple tasks, so you don’t have to spend extra hours on something menial. This will save on costs.
Technology has done wonders for small businesses everywhere – make sure to use it wisely! You might also want to look into automating some processes in your business; this could free up time (and money) for other endeavors.
Utilize Credit Wisely
Credit card companies offer a variety of benefits to small businesses, including cash back rewards on certain purchases and 0% introductory APR rates. If your business is looking for ways to save money, using a credit card can be a great way to do so. Before signing up, read the terms and conditions carefully, as some cards have annual fees or other charges. But overall, using a credit card can be a helpful way to reduce your expenses.
Another great way to save money on business costs is by taking advantage of business credit card discounts offered by various organizations. For example, the American Express OPEN program provides exclusive discounts on products and services for small businesses.
Invest in your employees
Lower your healthcare expenses by implementing a corporate wellness program. This will improve the health and well-being of your employees, but it can also lead to cost savings. According to a study conducted by the National Business Group on Health, companies that offer comprehensive wellness programs see an average reduction in healthcare costs of $522 per employee per year. That’s a significant saving!
You can implement many different types of corporate wellness programs, so be sure to choose one that best suits your company’s needs. Popular options include health screenings, smoking cessation programs, weight loss challenges, and stress management workshops.
Consider Life Insurance
Life insurance for business succession keeps the business running and provides family access to necessary funds, even if your assets are tied up in the company. … As a small business owner, taking out life insurance on a partner or other key employee can also help support long-term security for your company and family.
Life insurance helps attract new employees: When an insurance company issues a policy, they do so because it is determined that the policy owner will incur a financial loss when the insured passes away. The insurance industry calls it “insurable interest.” Because a business owner may incur a financial loss if a key employee dies, insurance companies generally let business owners have insurable interests over their employees.
Life Insurance provides unique tax benefits to business owners: There are several tax benefits associated with whole life insurance, extending to the cash value growth while the insured lives. The death benefit after the insured has passed away. Business owners need whole life insurance because it provides a place to grow wealth tax-free. With careful planning, distributions can also be taken tax-free. ~Ihssane Khatib, CYP
Join a business networking group
Business networking groups are a great way to connect with other entrepreneurs in your area. You will be able to share ideas and resources, but you can also get discounts on goods and services. As a bonus, many networking groups offer free or discounted rates for their members. So if you’re looking for ways to save money, joining a networking group is a great place to start.
Work with Financial Professionals
CPAs do much more than your taxes!
CPAs provide valuable services to businesses, including tax preparation, bookkeeping, and financial consulting. Working with a CPA allows small business owners to save money on their taxes and make sound financial decisions that will help them grow their businesses. In addition to providing essential services, CPAs are also excellent sources of advice and support. If you’re looking for ways to lower your business costs, working with a CPA is a wise decision.
If your CPA says, “I’m too busy”!, Runaway!
Most CPAs would be happy to help you if you give them enough notice. You don’t always need an appointment; send them an email or call them up. They’ll be more than happy to answer any questions you have.
Hire a tax planner to help you save money on taxes
If you’re like most small business owners, you’re always looking for ways to save business costs. One of the best ways to do this is to hire a tax planner. Not all CPAs are tax planners, so do your homework! A good tax planner can help you take advantage of all the deductions and credits available to you, saving you a lot of money on your taxes.
Why should I invest in a bookkeeper?
One of the best ways to lower your costs is to work with a bookkeeper. A good bookkeeper can help you ensure that your financial records are accurate and up-to-date. This can help you avoid any costly mistakes down the road. Additionally, a bookkeeper can provide valuable insights into how your business performs financially. A bookkeeper can help you make more informed decisions about allocating your resources by tracking your expenses and income. If you’re looking for ways to reduce your business costs, hiring a qualified bookkeeper is one of the best steps.
Where do I find a great bookkeeper?
There are many places to find a great bookkeeper, but one of the best is through referrals. Ask your friends and family if they know anyone who does bookkeeping well. You can also check online directories or classified ads. Just be sure to interview several candidates before making a decision.
Another option is to use an accounting firm. This can be more expensive, but it may be worth it if you don’t have the time or knowledge to do the bookkeeping yourself.
Financial Advisors work with many businesses too.
Financial advisors use investment, savings, and tax strategies to help business owners achieve their financial goals. Their professional expertise can assist owners in executing their business plans, designing retirement plans for themselves and their employees, and putting a succession plan in place. The financial advisor will track progress toward achieving their goals and make suggestions along the way if needed. Most importantly, partnering with a financial advisor frees up time and energy so that business owners can focus on activities that will grow and strengthen their business, such as hiring new employees or trying out new marketing tactics. “~Bosmat Cohen, Edward Jones
Consider a Retirement Plan
“When it comes to retirement plans, there is quite a list to pick from 401k, SIMPLE IRA, SEP, Owner only, Traditional IRA, or Roth IRA. Some plans allow the contributions to be tax-deductible to the business, while others to the employee. In some plans, contributions are pretax, and in others, after-tax. Deciding which plan is best for your business can be overwhelming. It’s important to understand the needs of your business and the primary reason for having a retirement plan. Is it to save taxes for the business? Is it to attract high-quality employees? or is it to provide retirement income to the business owner? Or is it a combination of reasons? A financial advisor can help you identify the best plan to suit your needs and set it up for you.” ~Bosmat Cohen, Edward Jones
Hire a Business Coach
Business Coach versus Financial Business Coach
As a business owner, it’s preferable to have a coach who has a hands-on skill set so they can shortcut your way out of a messy situation. And, what kind of training and education do they have in business coaching?
It’s essential to contact the coach and talk to them about your specific needs. Some business coaches focus on a money mindset and building confidence. Do you need this? Or do you need more? It all depends on your current situation. Make sure they are qualified and match your needs.
Here are some interview questions I recommend.
Can they help you develop a plan for reducing expenses and increasing sales?
How did they become a business coach? Are they certified?
Do they have professional business insurance?
Are they experienced working with companies of your size?
Did they ever own or lead a small business?
Have they ever been an employer before?
Question and Observe
Listen closely to their answers to ensure they are qualified for your needs. If they don’t come from a small business background, for example, corporate, they likely are great with goal setting but might struggle with small business problem-solving.
You can vet a business coach when they visit your place of business. Do they ask for your profit and loss report? Will they gladly tour your facility? Are they great listeners? And does this person as high-quality questions?
And, are they nurturing? Coaching is a nurturing profession. This person must be open, encouraging, and focused on building your capabilities. They teach you the skillset you need rather than having them rely on them to do it for you. Run away if they discourage, judge, criticize, or blame others!
Most importantly, work with a small business coach.
Here’s what’s going on.
You’re working hard, but your business isn’t where you want it to be. You’re not sure what’s holding you back, perhaps it’s so expensive to be in business now, but you know that something needs to change.
I’ve been in your shoes.
Deciding to get help is tough, but it’s the first step to success. What expenses can you negotiate down? Or, what costs can you cut altogether? Most small business owners never reach their full potential because they don’t have access to the right advice and support.
Let’s see if I can help.
I am a certified small business coach with over 26 years of experience helping businesses like yours achieve their goals. Our free consultation will discuss what’s holding you back and your most troublesome costs to do business and give you a roadmap for boosting your net profit. Apply for a free consultation today!
Janet Johnson is a small business advisor and author of My Money Pivot: An Entrepreneur’s Guide to Finding & Making More Money and this educational blog. All views expressed belong solely to Ms. Johnson and do not represent the views of her employer.