It’s estimated roughly 20% of new businesses fail after one year and nearly 50% cease to exist after five years. There are a number of reasons businesses fail, but one of the many issues is budgeting. In fact, surveys have found that 30% of small businesses are currently losing money year over year and an additional 30% are only breaking even. Lack of sales is certainly a factor, but tying up large sums of cash in various business expenses can be equally damning.
Reducing your operating costs can prevent you from eventually having to file a Chapter 11 bankruptcy. The key is reducing costs without cutting corners. Thankfully, there are a number of aspects within your business you may be able to tweak that won’t impact the quality of your output. On the contrary, many of these cost-cutting activities could actually enhance your business.
1) Avoid Hiring Experts By Becoming An Expert
When you pay to hire an expert, you’re paying for years of knowledge, experience, and an established process. Experts can make your work balance easier and allow you to avoid the stress of having to deal with business aspects that aren’t your strength. However, the expertise you’re paying for will never be cheap.
If your budget is tight and you have additional time, you can reduce costs by learning how to run various aspects on your own. Online tutorial sites like Lynda and Udemy offer extensive libraries full of courses with topics ranging from accounting to graphic design. Performing your own bookkeeping or website management can save you money on small tasks so that you can reinvest that money into your core business.
Unfortunately, Lynda and Udemy are not free. Nevertheless, there are a number of online learning resources you can dive into without paying a cent. Sites like Coursera offer full online college courses at no cost. Gaining additional knowledge makes sense for individuals with spare time, however owners operating on a packed schedule may find that taking on additional responsibilities does impact business quality and reduces scalability. The next best option would be finding individuals who can perform necessary tasks at a reduced cost.
2) Hire Freelancers
When you need work done and you can’t do it yourself, freelancers will likely be your best option. Freelancers don’t have the high overhead expenses that come packaged into pricing when you hire an outside agency or company. Depending on the amount of work you need performed, it can also be significantly cheaper to hire a freelancer on a need-basis rather than hiring a full-time employee. Not to mention, you won’t have to pay benefits such as health insurance and company perks.
The flip side of working with freelancers is that every time you need new work performed, you’re essentially interviewing for a position all over again. Learning how to hire freelancers is an art that takes time to develop. It can be difficult to predict the quality of work you’ll receive, especially when you don’t have an entire month to make a hiring decision. Luckily, most freelance platforms such as UpWork or Thumbtack offer a user rating so that you can gauge the quality of a freelancer based on past jobs performed.
3) Review Your Insurance
Not every home-based business has insurance. For those that do, it’s possible you may have liability insurance for client visits, business property insurance for your work equipment, or even business auto insurance if you make deliveries. If you haven’t reviewed your insurance coverage in a while, it could be time to revisit what you’re paying.
In certain cases, you may be carrying insurance you don’t need or paying more than you have to. It is in your best interest to review your coverage and contact additional insurance providers to see if you can get a more competitive quote. Changing insurance providers or coverage can reduce your monthly costs without modifying any aspects of your normal business activities.
4) Consider A Virtual Receptionist
Does your business receive a high volume of calls? It might be tempting to hire a full-time administrative assistant, but you can cut administrative costs down by over half when you outsource the work to a virtual receptionist. Additionally, virtual receptionists can actually offer enhanced customer care, because many of them operate 24/7. A virtual receptionist can even bolster your digital presence if live chat is packaged into your plan.
Pricing will be largely dependent on the volume of calls and messages you receive, but you can obtain a virtual receptionist for as low as $50/month. Enhancing customer service while increasing leads and reducing business costs is a true win-win scenario.
5) Invest In A CRM
It may seem counterintuitive to spend money in order to save money. However, a CRM (Customer Relationship Management) can save your business money on a number of fronts. “Time is money,” as the old adage goes. First, a CRM can eliminate the time you spend logging customer contacts and creating customer profiles. The less time you spend on trivial work, the more time you can spend growing your business.
A CRM may combine aspects of various software programs you currently use (contact management, lead management, sales forecasting, sales analytics, web analytics, etc.) so that you can eliminate having to pay for multiple tools.
Additionally, the plague of lost or misplaced invoices occurs with more frequency than you may believe. A CRM will flag lost invoices for immediate chasing, so you can collect on outstanding invoices.
Finally, a CRM can help you evaluate your marketing efforts to determine which campaigns are bringing in new customers and which campaigns are not. When every dollar matters, the last thing you want to be doing is funneling money into marketing that isn’t producing any results. The ability to analyze marketing efforts is perhaps the most important cost saving aspect. A CRM typically costs anywhere from $50-100 per user per month, but you can find CRMs that cost as little as $10 per user per month. That’s a small price to pay for the benefits you reap.
6) Try Bartering
As a home business owner, you undoubtedly possess a number of different skills. When working with small businesses, freelancers, or other home-based businesses, you may be able to barter for services rather than pay for them. Whatever you offer should be equivalent to what you are receiving. Business owners that provide a specific service could offer up that service. Owners that sell products, may be hesitant to offer inventory items. However, as an entrepreneur you likely have valuable business insights you could contribute without having to give away any of your products. You may be able to offer consulting services in return for a service you need.
Like learning to take on additional business activities, a bartering system saves you money at the expense of your time. If you don’t have time to spare, offering bartered services could reduce the quality of your work or stifle your scalability. Bartering only makes sense when you have spare time to give.
7) Renegotiate With Vendors
You may not work with many vendors in your home-based business, but you undoubtedly have a few. At the very minimum, you’re paying for service from an internet provider. If you have been working with the same vendors for years, it’s likely time to revisit your agreements. Prices are never set in stone and an established relationship can allow you to negotiate lower costs. As long as you don’t negotiate a reduction in what you’re receiving, you’ll have effectively reduced expenses while receiving the same goods and services.
Managing business finances is never easy. Keeping your budget in check starts with a thorough analysis of your expenses. If any of the aforementioned techniques seem like they could benefit your business model, they are certainly worth testing.
