7 Tips to Cut Operational Costs for Small Business Owners

Big conglomerates can lay off a few thousand workers (it’s happening everywhere) but what about the small business owner. The service provider with a staff of 10 or 20 and a nice office near a major metropolitan area? What’s this woman supposed to do?

Lay-offs? Like shooting yourself in the foot. And besides, these aren’t faceless employees. They’re friends who have dedicated themselves to building your business. Lay-offs are the last thing the small business owner should consider when weighing operational costs.

However, there are things that a small business owner can do to cut operating costs. And what better time to think about them then than at the start of a new year.

1. Expand service or product offerings.

Sell more stuff. If you provide a service, let’s say you own an accountancy practice, hire a financial planner to expand service offerings. Hook up with a legal firm to offer estate planning and will preparation.

If you sell products, contact wholesalers and sell more products, whether it’s cleaning supplies or eyeglasses. Add more items to your product line. It’s simple. The more diverse your service or product offerings, the more you see in sales.

A word of caution here! Some wholesalers want you to carry inventory, usually net 30 days. You can often negotiate better terms, or better yet, let the wholesaler handle order fulfilment. Your business just captures the order. It’s found money, and certainly a talking point when talking to a new wholesaler.

2. Recycle.

How much paper does your office toss out each day? It has two sides. Cut waste paper in to quarters, staple and use to take telephone messages. Indeed, it’s not a huge money saver but, again, in business, every penny counts.

Refill printer cartridges. You’ll save a bundle – even hundreds of dollars a year. Those things are expensive!

It also creates a mind set within members of the office staff. Use less. Reuse when possible.

3. Clean your Airconditioning system.

When was the last time you cleaned your heating, ventilation and air conditioning system? Maybe never?

Estimates are that you can cut up to 15% on your electricity bill simply by tuning up your system. Get somebody up there crawling in the duct work scrubbing out the air vents.

Side benefit: fewer colds, illnesses and paid absences.

4. Offer benefits in lieu of pay raises.

An extra week’s vacation will make a good employee happy when staff budgets are on the line. A better parking spot will make some people happy. The point is, you can save operational costs by offering better benefits instead of a raise.

Check with your insurer to see how much it would cost to pay for better coverage. I’ll bet you it’s less than a 5% raise across the board.

More personal leave days. Longer maternity leave. More holidays. These add up to a happy staff that recognises that you’re trying to keep them in place. That you appreciate them.

5. Promote from within.

This one doesn’t take too much analysis. Who better knows the company cash flow than the bookkeeper that balances the bank account each day? Wouldn’t he make a good financial officer? You bet he would. And there’s no learning curve.

This isn’t a case of giving an employee a fancy-sounding title and that’s it. Delegate responsibility. Show trust in your people and promote from within. You’ll save the cost of a new hire, you’ll have a productive financial officer in place on day one and you’ll boost staff morale.

Everybody wins.

6. Don’t buy new. Upgrade.

It’ll cost cash to buy new equipment for a staff of 15. Lots of cash!

Instead, add some RAM chips to speed up an older system at 1/5 the cost of a new system. You or your IT whiz can do it. Upgrade monitors instead of buying a whole new system. It’s a lot easier to add a new keyboard, a new monitor, a bigger hard drive than it is to buy a whole new computer so upgrade and save big time. Your business will be technologically current and your staff and systems operating at peak productivity for a lot less money.

7. Use the world wide web (W3) to market your local business.

No, you’re not looking for business from Panama, but today, search engines are designed for local search. By querying a service with an address, your business shows up with a pushpin in a map and complete contact information courtesy of Google.

Build a small, inexpensive web site (figure around $2000) and integrate your website into other advertising and marketing. Your web address should appear in newspaper adverts, brochures, business cards, invoices – any paper associated with your business – slap on the web site URL.

This is called integrated marketing. The web site serves as THE place to tell the company story and establish your business’ unique selling position or USP. All other collaterals point the reader to the web site.

A web site requires an initial cash outlay, that’s true. Consider it front-loaded promotion. That web site, with pushpin in a map, printable directions and an easy-to-contact telephone number, will pay for itself in new business.

Google “local search” to learn the tricks and tips. Just know that the W3 is the small business owner’s best friend when it comes to marketing as more and more prospects turn to the W3 for their service and product needs.

Who wants to drive all over town? This one tip alone will cut your marketing budget in half if you plan smartly.

There are other things you can do: offer loss leaders, move to a smaller office, cut service hours, tele-commute – but all of these, ultimately, hurt your small business.

It’s time to get smart. It’s time to cut your operational costs while keeping your people happy, secure, in place and, most of all, productive.

It starts at the top with you. So, what are you going to do today to save the company a few dollars? Every penny counts, remember.

Michael Harrison is a consultant, marketer, and business generation specialist dedicated to assisting professional services businesses to grow and increase revenue, margins and profits. He can be contacted at Strategies Plus