One of the biggest financial challenges faced by small businesses is operating expenses. According to Semrush, 66% of small businesses face financial challenges, with 43% claiming the most prominent challenge is paying operating expenses. Operating expenses cover labour costs, employee benefits, insurances, necessary tools etc. With 2020 proving to be too much for some small businesses to sustain operations, now is the time to look at your operating costs and determine where you can add value for your audience, and reduce costs for you. Below are some tips to keep your costs down, and your profit margin up.
First, embrace some contemporary business practices which have been steadily reducing operating costs for years.
Utilise emerging technologies – innovations in bookkeeping softwares, business management and CRM systems have made processes quick, painless and effective. They’ve also dramatically reduced the amount of hours and manpower required to get a job done. Another benefit of contemporary digital technologies is the tendency for them to be paperless, eco-friendly innovations, saving you cost on deliveries, waste disposal and physical storage.
Another way to reduce operating costs is outsourcing certain practices to third party experts, who can get tasks done much more efficiently and effectively than in-house employees. This can be particularly helpful for marketing and creative services which is often a common pain point for small businesses.
When it comes to utilising vendors, make sure to shop for the best deal that will bring the most value to your business. Be aware that some deals seem cost effective but include features not relevant to your business, meaning you may end up losing money in the long run. Additionally, ensure vendor invoices are paid on time or early if possible. Some vendors offer discounts for early invoice payments, and most (if not all) will charge extra for late payments.
Finally, analyse your business and determine all operating cost inefficiencies. Check for practices which are out-dated, use old technologies or are no longer useful.
This is an ongoing practice, one where employee participation should be encouraged. First hand experiences of policies and procedures are the best way to determine their efficacy.
Considering small businesses are still in recovery from the year that was 2020, reducing operating costs and increasing profit margins is on every business owner’s mind. Following these practices will help your business rebuild in a self-sustainable way.