You don’t need an advanced degree to understand that the key to success in business is boosting revenues while managing costs. However, understanding this is one thing, and putting it into action is quite another. And this is especially true when it comes to managing costs. We’re often reticent to reduce expenditures out of fear that this may cause us to harm productivity and revenue, but this really doesn’t need to be the case.
In fact, if you are smart about how you manage your expenses, then you’ll likely find that doing so not only helps reduce overhead, but it can also help make your business more profitable by increasing margins and making you more adaptable to an ever-changing marketplace.
Here are some ways to cut costs without cutting corners.
The first thing you will need to do is separate your business functions into those that produce income and those that don’t. Some examples of income-producing activities are:
And some examples of non-income producing are:
Overall, the key to cutting costs without cutting corners is to take a different approach for each business function. Specifically, you will only want to make cuts to income producing activities when you’re guaranteed that doing so will produce better results, or when you’ve identified areas where you’re wasting money. For example, perhaps you’ve been spending a bunch of money on Facebook advertising. You’ll likely find that some ads are more effective than others, so if you cut out one tactic and focus on another, you can save money and also leverage the success of your current efforts, which will not only bring down costs but also boost profitability.
However, when it comes to non-income producing activities, you can be a bit more ruthless. The goal here is to accomplish your goal for as little as possible. To get started, look at how much you spend on supplies, labor, software, etc. and see if there are things you could be doing better. And wherever possible, try to implement technological solutions to help you get leaner.
Along these same lines, make sure that any cuts you make are centered around efficiency. If you cut staff to save money but then find out that you’re shorthanded, then you’ve really done nothing to help the business. Engage your employees to find out what they might need to be able to do their jobs more effectively. You might find that the culprit is a poorly designed process or system, and that making changes to it can allow you to operate much more efficiently and cost-effectively.
Another way to cut costs is to figure out how you can do more things in-house. For example, if every time you want to make a change to your website you end up having to call up a professional web developer, then these costs are going to add up. An alternative would be to invest in a course for your employees to take that helps them learn the basics of being a webmaster. This will allow them to do some of this stuff on their own, reducing the need to call in expensive outside help. And this will also give you a boost in employee retention, as a lack of professional development is one of the main reasons someone winds up leaving a company.
Outsourcing can be a great way to save money without sacrificing quality, especially when it comes to functions requiring large amounts of infrastructure. Two great examples of this are IT and customer service. Few small firms have the capital to build a call center or to house their own web servers, but companies that specialize in this do, and because they can spread costs out over multiple different clients, they can offer you tremendous savings that will help you cut costs without cutting corners.
In the end, what we’re talking about here is the process of optimization, i.e. getting more out of your business for less. It’s something every business owner should be doing constantly, but these four tactics will help you get going in the right direction.
About the author
Kevin is the founder and CEO of Vast Bridges, a customer acquisition and lead generation service dedicated to helping businesses of all sizes implement a strategic growth plan. And in addition to Vast Bridges, he also runs Broadband Search, which is a website that helps people find the best value internet service provider in their area.