Thrifty business owners can do plenty to reduce their operational expenses, improve cash flow and take home more every month. It’s just a matter of identifying the most effective places to cut—and recognizing that it’s entirely possible to cut too deep.
Here’s a look at five business expense categories where your company may be able to save some money.
1. Utilities and Overhead
How much are you spending to keep the lights on? Taking simple steps to boost efficiency in the workplace, such as reminding employees to turn off lights when not in use and swapping out inefficient appliances for newer, more efficient alternatives can substantially reduce your overhead costs.
2. Legacy Technology
What’s that old computer or printer costing you? If you’re not maintaining it properly, then it’s probably hurting you more than it should.
“Legacy technology can be a huge drag on your business’s bottom line, especially when it performs sub-optimally,” says George Otte, a Miami-based entrepreneur who specializes in computer repair and other technology-driven enterprises. “Targeted investments in proactive maintenance and periodic repair can lengthen systems’ lifespans, reducing annual outlays for new technology and improving your company’s cash flow picture.”
As they say, an ounce of prevention is worth a pound of cure.
3. Recruiting Costs
According to Forbes, the cost of recruiting a quality employee can exceed a year’s salary for the position. For many lean businesses, that’s simply unacceptable, regardless of how crucial the employee is likely to be. If you’re balking at stiff recruiting costs, consider hiring contractors in place of employees—they’re more flexible and typically cost less to employ.
4. Extra Space
It’s not uncommon for ambitious entrepreneurs to select office space capable of accommodating company growth. If you currently employ 15 people, but expect that figure to double within 12 months, there’s no point in signing a long-term lease on an office that can comfortably fit 20 or 25 employees.
Of course, circumstances all too often intervene. When revenue fails to increase at the pace you expect, it’s only natural (indeed, prudent) to push off your ambitious hiring targets. Once that happens, you’re likely to find your employees swimming in a space meant for far more workers.
If you’re at all uncertain about your growth targets, hold off on going too big, too fast. Instead, try to sign short-term leases with expansion options. If you’re already locked into a longer-term lease for space you don’t need, crunch the numbers on whether it makes sense to break the lease and move into a smaller space.
5. Professional Services
Your company almost certainly can’t provide for all of its professional service requirements internally. It’s likely that you will need to outsource certain legal functions, accounting and bookkeeping, payroll, web development, marketing and perhaps other activities.
Maintenance is one of the biggest expenses property owners must contend with. Fortunately, new technology has made it easier to deal with upkeep. You can look at drones for sale, which can help you trim trees, clean windows and deal with other routine tasks.
Though it’s usually cheaper to outsource than to hire internally, outsourcing can still be more expensive than many business owners realize. Look for software-based professional services that offer package deals, such as pay-per-month use of an accounting platform, or a la carte options, such as pay-per-document legal services. In many cases, these options are more affordable than retaining an individual professional, and don’t require any compromises with regards to quality.
Which business expenses are ripe for cutting at your office?
