When you are a business owner, every penny you save counts, especially with all the craziness going on in the economy. Even a small cost can be compounded over time and end up significantly affecting the company’s profitability. Also, efficiently reducing your costs can give you the opportunity to stand out from your competitors. 

Before you get worried, having to go through every dime spent in the accounting sheets isn’t necessary – all it takes is a cost-reduction strategy that you can put into action with some common sense. 

Since it is already the end of the year, it is the perfect time to reflect on your business, but if you’re reading this at any time of the year, it won’t make it less effective. Take a step back to look at what business practices you’re doing well, which you’re spending too much on and the returns aren’t worth the spending, and which need improvement.

Having some clarity first will help in jumpstarting your cost-reduction strategy. Let’s get into the ways to cut business costs.

Analyze your balance sheet

As mentioned, knowing well what your business is spending on is the first step in establishing a cost-reduction strategy. Take a step back and look at your balance sheet, and make an Excel sheet with your real vs expected budget and spot the variances (this is what most large corporations do). Try to forecast your budget for a duration of time, compare it to what you are actually spending on, and see if the extras are worth it, or if you can even cut further. 

Negotiation

With your business getting bigger, it is a good opportunity to negotiate with your vendors and suppliers, especially if the quantities are increasing. There is no contract where there is no room for negotiation, you can even negotiate your phone and internet contracts. 

So, when you are negotiating with suppliers, you should mention that you are looking at other suppliers as well who can give you a better price. But, make sure that you fully understand what you’re talking about because they might test if you have actually communicated with better suppliers who will give you a better deal, or if you are just saying this so you can get a better deal out of them. 

So, be more specific with your words like supplier X will provide me with Y price for a certain quantity of goods. This will let them know that you have done your research and can close the deal at any time.

Virtual Recruitment

Ever since the COVID-19 pandemic, people have been realizing the tremendous benefits of remote work, especially when it comes to cost reduction and the productivity of workers. According to research, 77% of those who work remotely, at least a few times a month, show increased productivity. 

Some job positions cannot be done remotely or are more effective if done in the office, especially if they are more reliant on leading other people, but there are of course others that can be done perfectly from home and might even provide more benefits, like having a digital recruitment employee or team.

Focus on your staff

One thing business owners sometimes underestimate is the effects of hiring right before in the first place. Understandably, there are some people who don’t have the skills yet but seem to have promising potential, which can turn out great for them and for the company with the right training and give time. 

However, if the company is looking to cut costs, hiring people who already have the needed skills and are experts in the field will lead to better results because employees who don’t know how to do the work yet will spend a lot of time learning and research, and maybe making mistakes that the company cannot afford at the moment.

Consider the technology you are using

Softwares for companies are too expensive, and some companies make the mistake of subscribing to multiple software and thinking this will boost their business when it’s the other way around. Not only are the subscription fees costly, but the amount of time and training the employees will need to adapt to the new technology. 

So, it’s essential that you evaluate the usefulness of the technology to the company: do I need the majority of the features of this software, or can I subscribe to software with fewer features and less expensive? Are there alternative ways to complete the task, while maintaining the same quality? How much time will my employees need to become proficient in this software?

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