Smart Cost-Cutting Strategies to Boost Business Profits

Are you watching your hard-earned profits disappear each month into excessive operating expenses?

Operating a business costs money, and by actively managing cash flows and making strategic decisions, the expenses don’t have to break the bank. In fact, reducing unnecessary costs can make your business more profitable. It also streamlines your operations as you get very good at running your business on what is necessary. The leftover cash? You can invest it for a rainy day, hire help, get training in automation, and replace capital assets that keep breaking down.

Spending Smart: Focus on Value, Not Just Cost

As with personal finance, it is not about creating an unrealistic budget purely based on numbers and recommended percentages to live on. The numbers (expenses and income dollars) provide financial information and feedback, but decision-making additionally needs to come from a holistic and strategic perspective. Numbers alone tell you how much you have been spending and on what, but they do not tell you the “why” behind the expenses. You need to know your why.

Running a business purely on numbers is only half the picture. Every day, you get to choose where your money goes. In accounting terms, you run profit and loss and balance statement reports monthly, quarterly and yearly. Running reports with detail shows you exactly where and when your payables and receivables transactions occurred. They will inform you of financial patterns. You can use this information to map against other business activities such as promotional events, seasons, and when you hired new staff. Then you can look at why you spent the money you did and see if that investment is working to your advantage.

It is important to mention that cost cutting can be a very useful means of helping to manage your business, but do not let it reduce the service and product value, quality, safety, customer service and investment in your staff. Those are the cornerstones of your revenues; hence, choose wisely where to cut back and where to invest.

4 Easy Strategies to Reduce Operating Expenses

With emerging technology, access to incredible information and resources, operating a business has become far more cost-efficient than even 15 or 20 years ago. With user-friendly DIY software products, AI, integrative and versatile hardware, and the gig economy, all you need is to do your homework, keep learning, and get curious and creative. I’d also add, surround yourself with really good people as this will save you considerable time, money and stress, plus help you grow your business in ways you never imagined possible. 

1. Identify and Eliminate Unnecessary Expenses

Assess Your Business Expenses

• Look at your monthly financial reports. Is there anything obvious - large or abnormal expenses? Do you know what all the expenses were for? 

• Look at any association, online group memberships, or subscriptions to software you no longer use or magazines you don’t read. How about cell phones - are you able to negotiate a better contract with your service provider?

Evaluate Office Space Costs

• Do you need to be in the geographical location you are in, do you have more space than you need, or can you and your team work remotely and rent boardroom or coworking spaces as needed? 

• Are there other locations in the city that are less costly? If leasing, can you sublease a portion of your space? Can you negotiate better utility rates or building and equipment rental costs?

2. Use Technology to Save Money

Automate Business Operations

• Using tools such as ChatGPT and integrated AI functions in software can save you time. Brainstorm, prompt it for ideas, ask it how to do tasks quicker, what software would be the most budget friendly, how to solve problems, query marketing research and idea generation. 

• Use software and Standard Operating Procedures to systematize and reduce repetitive, time-consuming tasks

Look for Free and Low-Cost Software

• Use free tools for accounting, project management, and marketing. This will depend on your business size and needs, of course. Also, going too frugal can sometimes create more work, but if there are features you don’t need, look to see if there is a lesser cost plan to meet your needs. 

• Don’t just put down your credit card information because a shiny new software app promises free trials and the answers to all your problems. 14-30 days later, your credit card will be billed, and you may not even use the software because you don’t know how. Assess each software package and price plan individually. ChatGPT (free version) is excellent for this - prompt it for suggestions for the most budget-friendly software based on a list of needs you provide.

3. Consider Outsourcing to Reduce Staffing Costs

Hire Specialists and Freelancers for Projects and Retainers

• You won’t need to carry employee benefits and the administration costs of payroll. The gig economy is here, and the market continues to grow with highly skilled consultants, technicians and virtual assistants. You agree on terms, simply pay the contractor’s invoice. They are responsible for their own business operations and administration.

• Ask around for referrals, look at platforms such as Upwork, LinkedIn, and virtual assistant (VA) communities and search keywords for skillsets you are looking for. 

Hire a Virtual Assistant or Online Business Manager

• VA’s and online business managers help business owners coordinate a variety of admin tasks - such as marketing, websites, outreach, and copywriting. This will, more often than not, be at a lower cost than specialized technicians.

4. Optimize Marketing on a Budget

Use Low-Cost Marketing

• Start out with organic marketing (not paid ads); all it will cost you is your time. A basic website template, although limited in customization, will give you an inexpensive professional presence online to get started. You don’t need a customized website that costs thousands unless your specific type of business requires it. Design your own business cards on Canva, and print locally, quickly and simply.

• Social media and email marketing can be leveraged to promote your business for free. Join groups, chat business, be helpful, and connect with your audience.

Repurpose Content Across Platforms

• As you build marketing content, create a plan with a theme to share on blog posts, videos, and social media posts. You will be able to repurpose content over time and also use analytics to see what your audience likes and responds to. Then write more about that.

Conclusion

No matter what stage of business you are in, auditing your operating expenses can be eye-opening as to where all the money goes. This article has highlighted common areas where business owners get stuck, sinking too much money into their operations. Looking at the technology, staffing, and marketing costs and analyzing financial reports, you will see a pattern. It gives you the opportunity to identify what you want to keep investing in and where you could look at reducing costs. 

There is not a cookie cutter answer as to what you should do in your business. Conducting regular financial reviews, considering decisions from both a numbers perspective and a values perspective will help you get on track and move your company into higher profits.

Feeling a little overwhelmed? Finances can do that to a business owner, especially if your bookkeeping is way behind or the numbers don’t feel good to you. 

Avoiding dealing with finances and expenses in your business can become an unhealthy habit. I can help you break it down into manageable steps, look at what to prioritize and organize, and get things figured out. This is the work I do.

Ready for help? Book a FREE 30 min consult HERE