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Trade smarter, not harder: Unleash your inner pro with our toolkit and live discussions.
Running your own business is tough. While you get to be your own boss and set your own hours, you also have to come up with a successful business idea and have a working knowledge of everything from design and marketing to accounting and business law. This is a lot for any individual to manage. That is why it takes a vast amount of dedication and diligence to start a business and eventually become a successful business owner.
Running a successful business is also all about balance. You need to offset overheads with profits to remain financially viable and to ensure you and your staff are being paid enough to live comfortably. We’ve written up a guide with some key practices that can help you reduce your business expenses. Read on to check it out.
Evaluate Your Budget
The first thing you need to do when looking to reduce business expenses is to review your budget and financial plan.
You will create a budget when you first start your business, and as your business grows and maintains you may add and remove certain parts of this plan. However, this can lead to a plan that is disjointed and unbalanced, a hodgepodge of different strategies added when your business was in a different state.
Look over your budget plan as a whole and really evaluate how appropriate it is for your business today. Often, you’ll immediately notice unnecessary expenses that can be cut out to make instant savings.
Track All Spending
As your business grows, it becomes more and more difficult to accurately track spending. However, this can see you lose money rapidly, and it can be extremely tricky to identify where these losses are occurring.
You must put systems in place to track spending across your entire business. Everything from large-scale stock purchases to small petty cash transactions should be logged and stored in a system. Doing so will allow you to review spending and pinpoint where losses are taking place.
Assess Supply Costs
Procurement is often the most significant business expense, but it can also be an area where the most savings can be made.
You’ve likely developed relationships with your suppliers, and often it can seem preferable to pay a little more for the benefit of dealing with someone you trust and are familiar with.
However, assessing your supply costs can be an extremely effective way of reducing business expenses. You might be able to negotiate a new deal with your existing suppliers or secure a better deal by sourcing a new supplier.
Adopt New Technology
Technology drives the business world. If you’re looking to reduce expenses, there are a number of technological solutions that can help you do so efficiently.
AI can be utilized to automate a range of administrative processes, meaning you can scale back on staffing costs and reduce the risk of human error at the same time.
Alternative payment systems like cryptocurrencies can also be an option. These can see you reduce the cost of transactions, particularly fees associated with cross-border payments.
Downsize Office Space
Renting office space can be expensive. In the past, downsizing office space wasn’t possible without scaling back business operations at the same time, but with the power of modern communication technology, this is no longer the case.
Remote working has become incredibly popular. Allowing staff to work from home, even on a part-time basis, means you can downsize your office and reduce the cost of rent and utility bills.
Review Your Marketing Strategy
Traditional marketing was done through things like TV, radio, and print ads. These can come with high costs, and businesses would have to dedicate significant portions of their budgets to stay ahead of competitors.
In today’s world, there is an option for far more affordable and even more effective marketing. We’re talking, of course, about social media. These platforms can be used to target huge audiences at a fraction of the price of traditional means.
Review your marketing strategy and ensure you are taking full advantage of the benefits social media can offer.
Train Existing Employees
If you’re looking to expand into a new sector or add a new product or service to your existing offering, it’s easy to assume that you’ll need to take on new staff. But taking on new staff can have a detrimental effect on the business, especially considering the expenses associated with hiring alone. According to recent research, businesses spend close to £50,000 on new employees in their first year of employment. You need to focus on not overextending your business and putting more unnecessary financial strain on the company.
The best way you can do this is not through hiring, but through training your existing staff. Not only will you save the expense of hiring, onboarding, and paying new staff, but you’ll benefit from the fact that your current employees are already familiar with your business and how it works. As well as this, training staff has been proven as a good way to further motivate and engage your existing employees – a highly engaged workforce can increase profitability by more than 21%.
Speak to a Professional
There are various ways in which you take charge of your business’s finances and reduce expenses. However, sometimes there is no substitute for professional advice. A financial expert can pore over your business’s records and draw up a comprehensive cost-reduction plan. They do this by assessing the viability of the business model itself, outlining strategies for the business in the next year, 2 years, 5 years, and so on. They will timeline a path to profitability, and will similarly help you save on expenses in your journey to getting there.
There’s nothing wrong with seeking help as a business owner – in fact, it’s something that should be encouraged. No business owner knows everything about what they are operating in, and even if they did, a secondary expert perspective can be highly valuable. This approach may be costly to begin with but will certainly see your business not only save money, but build money in the long run.
Conclusion
In today’s times of ongoing economic uncertainty and instability, taking control of your business spending has never been so important. According to recent statistics, as many as 82% of small businesses who fail do so due to cash flow and budgeting problems, but 47% of these businesses do not have a formal strategy to deal with their expenses.
It is essential that, as a business owner, you revise all of the advice in this list, reduce your business expenses, and safeguard your company for the future.
