Saving money is always key when building a successful business. Now that inflation has currently reached levels unseen in the US since the early 1980’s, saving money has become more of a challenge.
At some point in the near future, inflation and supply chain problems are expected to level off and we will see “business as usual” again. But the reality is, inflation is always happening in some form because the value of goods and services is constantly fluctuating.
Costs Are Increasing for Everyone
Currently, the most popular way small businesses are dealing with increased costs is raising prices. You probably have done the same in your small business, but how much can you increase your prices before you start losing sales?
Rising costs are not just a problem for your small business, they are also a problem for your customers. Consumers have to make decisions on how and where they spend their shrinking personal income. This makes it tougher on the small business owner to increase revenues and grow their business.
The alternative to fighting higher costs is to reduce monthly expenses. Business owners should take a hard look at how costs can be reduced to help offset diminishing profit margins.
Focus on How You Spend
You can’t control how much the costs for supplies and services for your business increase, but you can control where and how you spend your money on those necessary costs. Tough economic times can spur some money saving habits to make your dollars go further.
- Lower monthly service fees where possible. Are you paying for some subscriptions or services you aren’t using anymore? It’s easy to forget some of those automated payments you have signed up for but no longer need. Take the time to scour your credit card and bank statements for any unnecessary fees you can eliminate. There will be fees or services you can’t do without, but see if you can find a cheaper solution or negotiate a lower rate.
- Find alternative vendors for supplies. Being reliant on a single vendor for an important item used for your product or service puts your small business at risk. When a vendor increases prices, or even worse, can’t provide what you need, it can cause a serious disruption and lost revenues for your business. Diversify your vendor base as much as possible to achieve the best sourcing options.
- Stock up on supplies. When you find a good bargain, buy as much as your budget will allow. This is the same idea many of us utilize in our personal lives, look for bargains and buy in bulk. Not only can this help reduce cost, it will also help minimize the risk of not having much needed supplies readily available.
- Go paperless as much as possible. What documents are you and your staff printing out each day that are thrown away after looking at them one time? Probably most of what is being printed. Think about what documents can be viewed on screen or saved in the cloud and make it a policy to start sharing files and documents electronically. You can save a lot of money not just on paper but also on printer ink, the wear on your printers and even save space in your filing cabinets. How great would it be to not have to clean out those overflowing filing cabinets every year?
- Streamline processes and increase efficiency. Are there tasks you and your staff are doing daily that can be improved? Technology is a great tool to free up time used for manual tasks. This is an area that is always ripe for improvement and should be constantly reviewed. If you are saving time with manual tasks you can then use those extra minutes or hours to focus on your customers and growing your business.
- Downsize your office space. A big advantage of being paperless and technology-driven is less physical space is required to perform day-to-day business functions. If you are a business that has or still needs a physical presence, can you find a smaller, less-expensive space to use? Not only could a smaller space cost less in rent, it would also save money on monthly utilities. If your business needs to stay in its current location, try asking your landlord for a rate reduction in your monthly rent.
- Use a Cash-Back Credit Card to pay for expenses. Business advisors typically don’t advocate credit card use for any expense unless it’s absolutely necessary, but using a cash-back reward credit card can save you hundreds of dollars during the course of a year. It is strongly recommended to pay off the balance each month to avoid owing interest, so be mindful of how much you are charging during each billing cycle.
- Refinance existing debt for better payment terms. If your business currently has a loan or financing arrangement, look for ways to reduce the monthly payment amount and free up some cash that could be used in other areas of your business. Any additional cash freed up by reducing monthly payments could also go toward paying down the principal balance of your loan. It is always a good idea to strive to be debt free.
- Focus on employee retention. There is no doubt the labor market is tight and a lot of employees are constantly searching for the highest pay rate available. Small businesses are often at a disadvantage when it comes to offering competitive wages and benefits. Take a close look at how your pay scale competes with other employers in your area and do what you can to keep your employees. High employee turnover can be more expensive than increasing pay rates by reducing efficiency and increasing your workload, leaving you less time to focus on running the business.
Plan Ahead
Take time to thoroughly review where your hard earned dollars are being spent and implement one or more of these money saving strategies to offset higher costs. Develop good common sense spending habits and increase the chances your small business will continue to grow.