7 Ways to Cut Your Costs
by Stephen Morris, Community Moderator
- Created: May 11, 2011, 1:33 pm
- Updated: April 18, 2014, 8:53 am
By David Hall
With the economy still going up and down, this is a great time to dive into your books and see where you can cut your costs. Remember that it is easier to cut costs than find new business - and if you can manage, do both; your business will make more money.
Renegotiate Your Lease / Mortgage
If you are renting a facility or have a mortgage, you may want to consider renegotiating to cut costs. Mortgage rates are currently very low and if your business is not in trouble, you could refinance to take advantage of lower rates.
If you have a lease, you have a few options. You may be able to ask the property owner to lower the cost if you can sign a longer lease. If you feel comfortable being in a certain location, locking in on a lower rate can save you a lot of money in the end. You can also consider moving to a less expensive location. Moving involves many costs, but it may end up being more economical in the end.
Cut Utilities (Energy Efficiencies)
Utilities prices seem as though they are always increasing. You may be able to cut your utility costs by applying some energy saving techniques:
Lighting accounts for 38% of all electricity consumption for businesses. Are your rooms lit even when no one is in there? Consider putting motion sensors on certain lights. If there is no activity in the room, the lights will be turned off automatically.
Heating and cooling your office is essential during the day, but many offices are closed throughout the night. If you can install a programmable thermostat, changing the temperate by 10-15 degrees during the night can save you 10% on your bill. The ideal temperatures are 68 degrees in the winter and 78 degree in the summer. There are many state incentives for cutting your energy. Do a search on the Database for State Incentives for Renewables & Efficiency (DESIRE) to see if you qualify for any.
After being in business for a few years, you may have vendors with whom you have been working since the beginning. Take some time to reassess their prices and services. Ask whether they can offer you a lower price, especially if you have been in business with them for a while. Do not feel that asking for a lower price will hurt your relationship. The worst that can happen is they will tell you they already are offering you the lowest price.
Rebidding contracts, such as cleaning, uniforms, and copy/print services, may lower your price as well. With the tough economic conditions, you may find yourself bidding lower and cutting some margins; other businesses are doing the same and you can take advantage of it too.
Take advantage of planning. Know when your vendors offer sales and discounts and take advantage of those. Many office suppliers offer deals on certain products, such as envelopes, paper and other office essentials, for up to 50% off throughout the year. If you see these sales, you need to take advantage and buy at that time.
Buying in bulk also will save you money. Speak with your vendors to see whether you can increase your order size. Depending on what you are buying, shipping can be expensive and the more you purchase, the cheaper the shipping per unit becomes.
When buying in bulk or taking advantage of sales, you do need to consider your storage space. If you double your order to get a discount, you will need to store that somewhere. There is always a risk with having excessive inventory. If your sales are dipping, run some numbers to see how long your bulk order will last.
In recent years, postage has continued to increase. Cutting out your mailed correspondences, such as invoices, notices, quotes and letters, can save you money. If you send an average of 250 pieces a month, you can save about $200 taking in paper, ink, envelopes, and postage.
Many large businesses offer savings for customers who opt for electronic correspondence. Looking at your own costs, you can calculate whether you can pass on any of your savings to your customers.
Internet and phones are essential for an office, but look at your bill to see if there is a way to cut those costs. Voice over Internet Protocol (VoIP) phones are becoming more popular. These phones use your existing Internet service to make phone calls, eliminating your phone bill. The FTC has some useful frequently asked questions about VoIP, its advantages and disadvantages.
Look at your current bandwidth and resources. Many internet providers offer different tiers of service. Make sure that you are not paying for increased bandwidth or speed that you are not utilizing.
Partner with Others
Look in your community for partners, especially other small businesses, and trade with them. They may need your product or service and you need theirs. This is an interesting way to cut costs. It may take some convincing, but it can be a win-win situation.
Also, look to collaborate with local business on services you need. Individually, you may not have the volume for specific savings, but together you may. Advertising in newspapers or sponsoring events can be pricey, but if you can go in with another small business, you may be able to split the costs.
A good way to meet other small business owners in your area would be through your local Chamber of Commerce.
At least once a quarter, you should look at your expenses and see where you can make some cuts. If you can just cut a few hundred dollars here and there, it can add up in the end.
About the Author
Stephen Morris is online media coordinator for the U.S. Small Business Administration where he manages digital outreach to the small business community.
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