4 Ways to Cut Operational Costs
Good money management is crucial if you have your own business – especially if it’s a quite new one. Studies have shown that many small businesses have failed soon after launching due to bad money management – for example buying more inventory than they need or choosing the wrong suppliers.
The truth is that if you want your business to succeed, you need to keep the costs under control, and we are here to tell you how you can do that. So, if you want to find out more about how to cut operational costs, all you have to do is keep reading. Without any further ado, let’s just jump right into it.
Think About the Rent
There’s no denying that the rent is one of the highest costs your company has to pay. According to the Census Bureau, leases and rental costs make up almost 10% of a company’s operational costs. Thankfully, there are several ways in which you can cut it.
First of all, instead of renting a whole building, consider renting just a floor in a building with other companies. Research showed that by doing that, some companies were able to reduce their costs by almost 50% by moving from a traditional office to an office business centre.
Secondly, you can rent virtual office services instead of taking up space in a traditional office. The perfect example is the telephone answering service USA, that answers the calls for you. This is especially beneficial for your business if you have a secretary or an assistant that works a night shift. Instead of having to hire one more person (since one will not be able to work both the day shift and the night shift), you can purchase the telephone answering software.
Supplies and Inventory
Aside from rent, supplies and inventory are another major cost that your company has to pay. By choosing the right suppliers, you can significantly decrease the money you spend on it – especially since many of them use more economical methods such as 3D printing. Since they are spending less money to produce your supplies, they can offer you a lower price for it.
Also, think about whether you really need to order so much inventory at once – remember that if you are low on something, you can always order more when you know that you will actually use it. This is especially important with new products, as you never know if it will be a hit or miss, If the product you are introducing to customers will not sell, you will be left with thousands of products and money you could have spent on something else.
Offer a Four Days Work Week
This is actually a very good idea not only to reduce operational costs, but also increase employee’s engagement – after all, who wouldn’t be thrilled to have a three-day long weekend? There are several ways in which you can approach this – if your employees want to remain full-time, you can offer a working day of 10 hours. It might seem like a lot, but once they start their weekend they will forget about longer office days. On the other hand, if they don’t mind a decreased amount of working hours, you can adjust their salary according to the time they actually spent working.
Another way in which you can reduce operational costs is reduce the staff size to those that you really need. As we already mentioned, there are plenty of virtual office services that work just as fine as humans. Instead of paying a person for holidays, hourly wage, sick leave, etc. you pay a monthly subscription for a virtual service.
Consider Relocating Your Marketing Channel
Companies use several marketing channels – that’s nothing new. After all, the more channels they have, the bigger audience they can reach. However, what they seem to forget is that some forms of marketing are more effective than others, but they still have to pay for all of them.
If you want to successfully cut your operational costs, you should consider relocating your marketing channels to those that actually work – after all, why not invest more in, for example, email marketing than bring you a ROI of 40%, instead of internet display ads, that only bring about 5%?
The Bottom Line
Keeping your costs and finances in check is a crucial part of being a business owner – after all, many companies have failed just because the people in charge didn’t know how to properly take care of the money they had. To prevent that happening to you, you need to be very careful with how much money you spend on individual aspects of your business.
If you think that you are spending too much, there are several ways in which you can cut the costs – some of which we mentioned above. However, this is just the tip of the iceberg, as if you look online, there are hundreds of others.
That’s all from us. Good luck!