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How to Cut Costs in Your Small Business

As a small business owner, you know that there are lean times and there are plentiful times. Inflation certainly reared its ugly head in the last couple of years and many businesses were forced to think long and hard about where to put their money. During those lean times, business owners had to cut down on costs in the hopes of recovery. Those times are difficult, forcing some businesses to resort to creative measures to get over the bumps in the road. If you find that your small business is facing tough times, here are some ways you can cut costs.

Reduce Overhead

As the saying goes, you gotta spend money to make money. It costs money to run a business, there’s no doubt about that. But how much of those costs are essential and how much are “nice to haves?” When it’s time to cinch the belt, the first thing to go will be those “nice to haves.” Here are a few places you could make some cuts.

  • Non-essentials: The first place to look is the “nice to haves.” This might include cutting back on costs associated with employee perks, company outings, takeout, or travel.
  • Utilities: Take a hard look at how much you’re using utilities and reduce consumption where possible. This could involve cutting non-essential power to areas when they aren’t in use or shutting down underused space.
  • Office supplies: There are always options for cutting costs with office supplies. Evaluate where you can digitize if you’re consuming a ton of paper or reduce your purchasing amount of anything with a surplus.
  • Building space: You may need to downsize any building space that isn’t being utilized. Potentially, you could also rent out extra space to try and recoup some financial flexibility.
  • Consultation fees: You may need to temporarily limit or cancel any consultation fees until you can get back on your feet.

Evaluate Inventory

Inventory is probably at the top of your expenses. It’s an essential part of doing business. But like most things, there are probably areas where you can cut back. Thoroughly evaluate your inventory and try to eliminate what isn’t necessary to keep things up and running. Here are some things to think about as you conduct your review.

  • Cut back to core offerings: Diversification is a must if you ever want to expand, but sometimes those new offerings don’t land as well as you had hoped. If you’re in need of cutting costs, scale back to your core offerings until things recover.
  • Reduce surplus: A surplus of inventory might make sense in those plentiful times, but it could be a good place to cut back. Take stock and avoid additional purchases of areas with surplus. You could also get creative with any surplus supplies and try to repurpose them towards a new offering to drum up additional business.
  • Buy in bulk when possible: When you absolutely need supplies to keep things afloat, consider buying in bulk where you can negotiate discounts and make your money stretch a little further.

Renegotiate with Suppliers or Find New Ones

Businesses are always trying to nail down the best costs for the highest quality. Lucky for you, the supplier game is a competitive one which gives you options for negotiating lower costs. If you’ve had a good experience with your supplier, try renegotiating for more favorable terms, or maybe you can arrange a bulk purchase instead of a smaller one. Suppliers are often well-versed in getting creative and a good partner will help you brainstorm for solutions that are favorable to you both.

If your supplier relationship isn’t all you’d hoped it would be, it may be time to find a new one that can help meet your cost needs and work with you to keep things operational. Don’t hesitate to get quotes from new suppliers if your current one isn’t working out.

Outsource Where You Can

There is certainly no replacement for amazing people, but outsourcing certain needs can help to bring down the costs associated with employees. Hiring freelance talent or outsourcing for things such as technology support or maintenance can free you up from paying employee taxes and other benefits.

Cut Back on Marketing and Advertising

You need to get the word out about your business, but you can remain operational without those marketing and advertising costs. Evaluate where you can cut back while your business recovers from the slow times. This might involve cutting back on those advertising efforts or even undertaking some of the marketing work yourself until you can afford to dedicate funds back to those areas.

Buy Used or Refurbished

When the going gets tough, you may need to buy used or refurbished equipment. Evaluate the risk associated with going secondhand and take advantage of the costs savings when you can. For example, you could buy refurbished phones for your employees or purchase a used machine from another company.

While cost cutting may not be the most exciting part of business ownership, it’s essential to get through downtimes. Want to see about getting better rates on your insurance? Find out more by speaking with a licensed PCIA agent today: (877) 927-6579