These smart tips will help you cut expenses and boost your bank account balance.
Nearly 20% of businesses fail in their first year, and 30% fail in their second year, according to Fundera. Don't let these statistics dissuade you from following your dream; instead, use them to help you make laser-focused decisions that will benefit your business – and your bottom line.
While many business owners prioritize increasing sales, lowering expenses is just as important when you're trying to maintain profitability. Take a look at these 11 ways to reduce expenses and boost your small business's bank account balance.
1. Don't pay for office space.
Many businesses are run remotely. If you are in retail, this tip might not apply to you.
If you do not work in retail, consider staying mobile for as long as you can. When you sign a lease for office space, you will likely spend a lot of cash. You can convert a room or area in your home to office space. Not only can you save money on office rent, you can write off part of your rent or mortgage as a business expense.
2. Buy used equipment.
If you have a physical office space, consider purchasing used equipment. You can find everything from printers to office chairs at a fraction of the original price if you look online or visit used equipment stores. While new, shiny gear might be pretty, a bank account with a zero balance isn't. Only spend money on the items you absolutely need.
3. Shop around.
Many service providers operate in highly competitive industries. You can use this to your advantage by shopping around for services, or even just telling providers that you plan to shop around.
Insurance companies often offer bonuses or hefty discounts to customers who make the leap from their current insurer. The same goes for banks and credit unions that may waive fees or offer other perks. Not having to pay $10 each month in maintenance fees or getting $200 in free money for simply opening a new account is a pretty good deal.
Also evaluate the value you're currently getting from certain services, such as your VPN provider. In some cases, a lean startup can protect numerous devices with a single account.
One of the very best ways a small business can save money is by bartering. Some debt is healthy, but you want to make careful decisions about the debt you take on. Nearly every small business is in the same position you are – they are short on money – which is why you should consider bartering for goods and services.
Think about what your business does and how you could benefit another business by trading services. Each time you need a specific good or service, see if the company is willing to barter. It won't work every time, but it's worth a try.
5. Use freelancers and contractors.
Full-time employees cost employers a lot of cash these days. While ideally you will have a motivated and loyal staff, consider using independent contractors and freelancers for noncore work as you work to stabilize your business. Noncore work consists of areas or items that fall outside of your business's main activities or operations. HR services, accounting services and data processing are examples of work you could outsource.
Outsourcing these tasks is easy and can be less expensive than hiring traditional employees, provided you have an enforceable contract that clearly defines expectations to mitigate risks for both parties in the relationship. As an employer, you aren't expected to provide freelancers with family leave or time off with pay, retirement savings plans, or health insurance benefits – you simply pay freelancers for their completed work.
6. Volunteer to speak at events.
Try to impart your knowledge to others. One good way to do this is to speak at conferences or industry events. These opportunities act as simple and free ways to gain exposure for your brand and business and prove to others (i.e., potential clients) that you know your stuff.
7. Consider communal advertising.
All small businesses know that marketing can be quite expensive. It can cost thousands of dollars before you see any return on investment. If you are in good standing with other local businesses, consider advertising with them.
You could share mailing lists, distribution channels and suppliers with other small businesses. Is there perhaps a painter or house cleaning business that could recommend your business to their clients? If your business sells accessories for children, could you create a partnership with a photographer to promote your business?
8. Reduce paper use.
Cutting down on paper waste is not only good for the environment, but it's good for your company's bottom line. There are myriad ways you can slash paper use, such as these:
- Reusing paper for notes
- Shrinking the font size of your printed reports to print fewer pages
- Printing and copying documents so they are double-sided
Do what you can to use less paper – most of the items you print end up in the trash.
9. Use a smart thermostat.
If you have a brick-and-mortar office, you know how expensive heating and air conditioning can be. Yet, small changes in your office's temperature can negatively affect employees' productivity and customers' comfort.
One way to reduce your heating and AC bills without compromising comfort is buying a programmable or smart thermostat. You can change the settings so the office is warmer or cooler during the weekends or certain times of day (evenings and mornings) when employees are not in the office.
10. Encourage word-of-mouth marketing.
Word-of-mouth marketing comes in several forms: referral programs that offer rewards to existing customers who refer new ones, college brand ambassador programs that pay students to rave about the company's products, online review directories like Yelp, and social sharing communities on digital media and Pinterest. Your word-of-mouth marketing strategy must take into account your audience, including key demographics, their buying habits and the apps they use to communicate with other consumers.
11. Buy in bulk (when it makes sense).
The products sold at warehouse superstores can be tempting, but there are times when buying an item in bulk won't save you money.
Before you decide to purchase an item, ask yourself, does it make sense to buy this much of one item? If your office goes through a lot of coffee each month, go ahead and make the purchase. However, if you've slashed your paper usage in recent years, it may not save you in the long run to buy 1,000 reams of paper, especially if you don't have the space to store it. Moderation is key.
Every business is different. Take a look at your current expenditures – it won't cost you a penny – and it could produce significant savings over time.