What Is Cost Reduction For Your Business?
As we leave 2022 behind and march toward the new year, we hope to bring along the best business practices that kept us afloat. But economic instability looms around our good intentions. This struggle is not exclusive to startups or small businesses; even larger corporations feel the financial strain.
Consumer trends fluctuate and remain unpredictable while prices of goods and services increase. People want to spend but also save as the uncertainty surrounding life events continue. For instance, Medallia reports, “Most workers’ wages are not keeping up with inflation” and that “Half of the households are barely or not able to make ends meet.”
Yet, “travel and hospitality are trending upwards, despite rising costs.”
What can we, as business owners and marketing directors, make out of this unpredictability amidst the economic downturn? The data has shown that the economic instability may be here for a while; let’s seize the opportunity to cut costs and increase our bottom line. Cost reduction starts now.
How Do You Implement a Cost Reduction Strategy?
Most of us would love to give less to get more. Many life hacks and tips have been shared online to help people save time, money, or both. Let’s look at how implementing cost-cutting measures and energy savers to your business will increase your bottom line while scaling down those pesky expenses.
It’s essential to have a clear focus while undergoing cost reduction. If you step into the process half-heartedly or with vague goals, your initiative will most likely fail. Setting realistic expectations is one of the first steps in implementing a cost-reduction strategy. Once you determine what results in you are looking for, you can evaluate your expenses.
7 Ways To Cut Business Costs
It would be best if you came away with a clearer picture of potential problem areas once you delve deeper into your business expenses. A large-scale overhaul is often not required when reducing cost, though such an extreme measure is sometimes called for. Instead, let’s explore seven simple strategies that may leave you exclaiming, “What a no-brainer!”
1. Encourage Remote Working
Covid-19 helped global companies and organizations realize the significance of remote work and its vital role in efficiency. But remote workers aren’t only handy in a pandemic or in crises. They also can help businesses save money.
Studies show that remote workers are happier in their jobs, which not only boosts productivity but cuts down the unanticipated costs of absenteeism; this is when a person calls in sick when they’re not sick. It is estimated that this alone can cost an employer thousands of dollars annually.
That’s not all. Remote workers can also save you money on office space (a whopping $10,000 per employee per year!), and working from home increases workers’ loyalty, according to a Stanford Business study.
Working from home is not without its drawbacks, though. The effects of social isolation and limited face-to-face interaction cannot be underestimated. Add mental exhaustion from a steady flow of video meetings, and you have the perfect storm of declining mental health.
Luckily, there are solutions to these hurdles. From managing workloads to eliminating “always on” hours, we can offer the best support to our remote workers to ensure a balanced system of rest and work.
2. Hire Freelancers & Outsource
Outsourcing and bringing freelancers on board are also clever ways of finding extra money for your business. Yes, this is a simple way of avoiding considerable overhead costs, as you do not need to contribute financially to these independent contractors’ benefits or 401k contributions.
This practice will free up needed cash flow for you to save or invest in your business for its growth and success.
Hiring a freelancer will also give you access to an increasingly diverse talent pool. Upwork reports, “more than 50% of the workforce in the United States is predicted to be freelancers by the end of 2027.” This is great news for the times you need to find a specific qualification and skill; there will be no more settling for the best available person nearby.
We should also mention how hiring freelancers and outsourcing can also positively impact your company’s risk reduction.
When you hire a full-time employee, you invest time and money into them. Training and onboarding new hires is not a small feat. But what if that person leaves after one year? After 3 years? You’ll lose your investment when that person decides to leave.
But if you hire a freelancer, you’ll get your specific deliverables before paying, which allows flexibility and minimizes risk for your company. It may be time to do away with the thinking that success can only be achieved in person.
3. Modernize Your Marketing Strategy
Another effective way to cut your business costs is to look at your marketing strategy and shape it to current consumer trends.
This may sound like a daunting growth strategy, but it is actually more simple than you think. The first step is to look at how your past marketing campaigns have gone.
Did you reach a new demographic? Were any loyal customers disappointed? How much revenue came in? It’s essential to do a deep evaluation so you can continue to monopolize the methods that worked in the past while shedding plans that will only eat up your funds.
Many older businesses may hate this next tip on modernizing your marketing strategy, but we must say it: Establish an online presence. In this on-the-go society we’re living in, it will only be to your benefit to make your goods or services accessible with just the click of a button.
From searching what the local butcher has to find a pair of black sneakers near me, we rely heavily on businesses being on the web and can attest that many do as well!
Consumers love the handiness of apps. Data shows that almost 93% of smartphone owners use their phones for online research!
Why not aim to be visible by this 93%?
4. Cut Overhead Fees
Overhead costs, or fees, are simply the ongoing/day-to-day costs of operating a business. Fixed overheads include rent, salaries, property tax, etc.
We call them fixed because these numbers remain constant every month. Now, we also have variable overheads, which is the category we will delve deeper into.
These overheads increase or decrease with the different levels of business activity.
Some examples of this would be administrative costs, shipping costs, and travel expenses.
You can look into trimming variable overheads and keeping more of your profits by making simple changes.
For instance, cutting your budget for pantry snacks in the office or going paperless. Slight changes in cutting overhead fees can go a long way toward reducing your overall costs.
5. Automate Where You Can
We all know technology has many benefits, and automation is another way that technology can alleviate burdensome or repetitive tasks.
It is reported that workers spend “4 hours and 55 minutes every week on duplicate tasks. That’s 94 days out of the year spent doing something that could be automated.”
That sure is a lot of time! Setting up a business process to run on its own will enable business owners to focus on the bigger picture instead of smaller and often tedious tasks.
It is a great way to lower costs and optimize your business’ workflows.
Automating business processes such as payroll or scheduling meetings can save time and energy. This will help avoid employee AND employer burnout.
This tactic can indeed take away valuable human interactions. It can also be argued that manpower is the smarter way to go, as AI doesn’t have the mental/educational capacity to think on the fly.
Don’t forget that all automation plans need appropriate input from human workers who understand what it takes to run your company best..
6. Minimize Unnecessary Meetings
The keyword here is “unnecessary.” Almost everyone knows when a meeting could have been an email or phone call instead—except the person who called the meeting. There are surprising and hidden costs behind meetings, and lessening the time staff has to meet could put serious money back into the business.
Some examples of these costs can include catering meals, overtime pay, an uptick in office supplies, and possible speaker/travel fees.
Additionally, a meeting or webinar often takes time away from hands-on, productive work.
We’re not saying all-time in the conference room or on the Zoom call is wasted.
But when you consider this recent report stating that cutting down on needless meetings “could save your business an estimated $25,000 per employee each year,” I am sure you will think twice before sending that calendar invite.
7. Reduce Material Expenses
This tip won’t apply to all businesses…or will it?
This is a simple tip you can try right after reading this article. It may be the quickest of our cost-cutting initiatives.
Consider that unused surplus of cardboard, paper, and metal sitting in your business. Instead of throwing it away or recycling it, brainstorm how to sell it all back. You can even reuse the material for something brand new!
Repurpose it and get the total value of those materials.
This is an essential tip for manufacturers. Studies show that reducing material and manufacturing costs can increase a company’s sales because they sell their products at a lower price. With more profits in your pocket, you can invest back in the company with the possibility of creating more jobs.
Take Control of Your Operating Costs Today
The good news is that there is a significant amount that you can do to cut down on your business costs. We’ve all heard that 50 percent of businesses fail within five years, and no one certainly starts a business wishing they will be in this demographic.
One way to continue stepping towards success is to implement effective cost-reduction methods.
At Strategy Beam, we aim to support business owners and marketing directors with outsourced marketing services. With years of experience and various clients served, we can partner with you to ensure this unstable economy doesn’t claim another victim.
Are you ready to streamline your business and optimize your marketing budget? If so, contact us for your free 45-minute consultation to understand where your website is letting you down and how you can get more traffic today!