How to Cut Expenses as a Small Business
Small business owners know all too well the value of a dollar. This is especially true as a company grows and business costs rise. Tracking every expense can become cumbersome and easily fall by the wayside during busy times.
Over time, these hidden expenses begin to add up. By taking the time to figure out where your money drains are, you could dramatically impact your business’s net income. In this article, we’ll explore how to find and cut unnecessary expenses to save money for your small business in the long run.
Your Staff Costs
While necessary, employees are expensive. Full-time employees are an investment in time, money, and resources. Luckily, not every role requires a full-time employee — which is why so many companies rely on freelancers, contractors, and temporary workers.
If you need help on niche projects, contractors and freelancers specialize in working on tasks for companies and exiting upon completion. For short-term positions, hiring a temp is a smart way to get full-time help without paying big bucks. By hiring contractors, freelancers, and temps, you aren’t required to pay employment taxes, workers’ compensation benefits, or insurance costs for them, thus reducing your overall staffing costs. Not sure where to start? We recommend exploring temp agencies like Robert Half, and looking on LinkedIn or Upwork for freelancers.
A sizeable portion of revenue is often spent on office space rent. Sound familiar? If rent is eating your profit margin alive, you may want to consider some alternative workspace options.
Consider your geographic location; are you in a prime real estate area? What effect would it have on your business if you relocated to someplace cheaper? If your workforce is smaller, consider subletting an office space — you might secure a discount in the process.
Better yet, would it be possible for you to work from home or via a remote office? The cheapest office is the one that you don’t pay rent for. In this day and age, the world is no stranger to remote work. Many entrepreneurs often start off that way — whether it’s at home, in a coffee shop, or a shared space.
Take some time to explore your options for minimizing rental expenses, and you may be surprised at how far ahead you come out.
Your Marketing and Advertising
Up until the 1990s and the development of the internet, traditional marketing was really the only advertising option available. However, today’s savvy business owners use digital marketing – social media and websites – for advertising communication. Over 50% of the world uses social media, far more than the small percentage that would see your local billboard ad.
One of the most effective ways to lower your costs as a small business owner is to switch your marketing medium from traditional to digital. The Return on Investment (ROI) tends to be much higher for your budget in digital marketing, and it’s much easier to measure your results. Take email marketing: it has an average 4400% ROI, so for every $1 spent it returns $44. Not to mention that traditional advertising routes like television or direct mail can cost you dearly, whereas it’s simple to operate on a budget with digital marketing. Focusing your marketing efforts on digital mediums gets you more bang for your buck.
To give your advertising budget an even greater boon, consider creating a free business account and registering with your local Chamber of Commerce to access beneficial offers and discounts. Use effective digital marketing techniques to grow your audience, set your business apart, and increase your bottom line.
Your Daily Expenses
2020 was the year of virtual discovery, and one thing we all learned is that many tasks can be done virtually. It also brought to light the fact that many daily business routines cost a lot of money — routines that can be revised to cut expenses. Take business travel. The average business trip costs $1,293 and in 2019, companies in the U.S. sent employees on more than 117 million business trips! Nowadays, virtual meetings are commonplace. Consider scheduling remote meetings in lieu of face-to-face conferences and seminars, rather than requiring employees (or yourself) to travel on your company’s dime.
Other expenses you could reduce include traditional office equipment and supplies — especially paper. It’s estimated that up to 3% of company revenue is spent on paper printing, filing, and storing. Plus, a digital process will make your employees more efficient, saving time that would otherwise be spent searching for old files or on file organization. Consider utilizing digital tools and electronic filing to maximize gains and minimize expenses.
Bank fees is another business expense that is notoriously “sneaky.” Is your company a victim of “banker robbers?” Bank fees can slowly drain your accounts under the radar. Consider switching from your traditional bank to a digital one like Axos Bank. Financial institutions that are digital have low overhead costs, and the savings are passed to customers — often in the form of low-to-no fees and high interest rates.
Those aren’t the only reasons to switch to a great digital bank, though. Axos offers business owners other perks like free online bill pay and remote deposit.
Pro tip: maximize your savings by putting it into a high-yield savings account; the high interest will help grow your funds over time.
Time is Money
The bottom line when it comes to trimming business expenses is that when you save time, you save money.
From full-time hires to business travel, there are many ways that small businesses could cut down on time and money spent. As you make the switch to digital for everything from advertising and meetings to electronic filing, you’ll free up time for you and your staff to focus on other vital business tasks. Then, turn your head to bigger culprits like rent and your savings will skyrocket.
With all the money that you’re saving, don’t let your bank snatch it away. Switch to a digital bank like Axos so that you can avoid needless bank fees, as well as generate more money over time thanks to higher interest rates.
As Sam Walton, founder of Walmart, once said, “Control your expenses better than your competition. This is where you can always find the competitive advantage.”
How to Cut Expenses as a Small Business
This blog post was published by Axos Bank on May 10, 2021 and last updated on May 10, 2021.