Your expenses are where you have the most control over your small business finances, although it may not feel like it all the time. Here are some ways you can reduce expenses in your business.
1. Negotiate with your suppliers
Are you getting a fair deal? Do your suppliers have your back? Have you negotiated the best possible terms, and do you proactively look for new suppliers?
I worked with a company that had the same supplier for years! And the owner always said, “Yeah, I know, I’m the best customer.” Then, when we dug a little deeper and realized something huge. Because they’ve been so working with them so long, the supplier basically figured, they’ve got them, so they don’t need to give them better pricing or a better deal. This customer is sticking around no matter what.
So, this company started shopping around for suppliers and ended up saving 30%.
Another way to reduce expenses in your business to check in with staff.
Some questions I always ask are, “Is everyone trained to do their job well? Does everyone know your vision and share at least a small piece of it? Do they have buy-in, or are they fighting against you?”
It can be really expensive if your employees are not on board with your vision. Save some money and check in with them. Are they going in the direction you want? And do you have time and productivity tracking systems in place to make sure they are?
Your base variable is your people, how well they’re trained, their attitude, how they feel about you, their skill level, and the culture that they create within your organization.
Having a written operations manual, even in the most basic sense, will help with this. It’s all about documenting systems. You don’t have to get all fancy about this. It can be simple systems, you could say, “Every Tuesday at 10:00 AM we have a strategic meeting to prioritize our time every week.” That’s it, that’s the system.
Your operations manual can be filled with simple systems like this, and it will make all the difference. Having that operations manual will increase your productivity, and it’ll save you from costly errors. When an employee is winging it and they don’t 100% sure how to do it, then they’re going to do it their way.
Use your vision and systems to train your employees and inspire them. Not only will you save money, but you’ll also increase happiness levels in your organization.
3. Stop discounting
Discounting is an expense that needs to be avoided.
I knew a retail store owner who discounted 10% to family and friends. The problem was… EVERYONE is friends and family when it really comes down to it. Having 10% less on every purchase eventually led to this small business owner closing her doors. Although it seems small at first, it added up to a big expense. Too big of an expense.
If you must discount because your target market expects, be sure to raise your prices by the amount you are discounting to offset the expense.
I was working with a husband and wife duo who felt they had to discount to keep their customers. To make it work, they increased prices by 6% and then gave everyone a 5% discount. So now customers could still get the 5% discount they expected, and the company could still make the amount they needed. This solution eliminated discounted and reduced expenses in their business.
4. Nice to have’s vs has to have’s
Don’t spend money in your company unless you have to! Ask yourself, is this a “has to have” or a “nice to have”.
This is one of those bits of advice I got when I first started my first business. Every dime you spend is your money, so just make sure that it’s what your business needs. I encourage you to stick to “Have-to-haves.” If you don’t need it, don’t buy it. At least not until you have enough cash in your company to not have to worry about cash. This will help you get to that place. Be strict about spending your money, and celebrate the rewards later!
Reduce your small business expenses!
I believe you can have a profitable business that supports your dream lifestyle. One step you can take towards this is cutting down your expenses.
Until next time, enjoy your Entrepreneurial Journey!
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