Every small business knows it can be tricky to reduce expenses without sacrificing internal or external quality. If you need to cut your overhead costs, the first step is setting aside time to comb through every single expense you have and understand exactly how much you're spending. Once you've taken that step, you can start to assess what's necessary, what can be reduced and what should be eliminated entirely.
"Print out a profit and loss statement that spans the past 12 months," said Claudio Conte, CPA and co-founder of Bullstrap. "Go line by line … [and] look into each expense to determine where there are possible areas of waste or excess. Applying this practice quarterly or bi-annually allows for a higher percentage of funds to be devoted towards income generating areas, and cutting funds going towards wasteful areas."
This can be a daunting task no matter how frequently you do it. To help, we asked entrepreneurs and small business owners how they recommend cutting costs while maintaining employee and customer satisfaction. Follow their tips as you're evaluating each line item on your budget.
Make a permanent shift to remote work
Countless companies explored large-scale remote work for the first time during COVID-19. Making a permanent move to telecommuting for roles where it makes sense to do so can have a huge impact on your overhead costs.
"Scrutinize the company and employee tasks, and allow those who can telecommute to work from home," said Sahin Boydas, founder and CEO at RemoteTeam.com. "Allowing some or all employees to telecommute will reduce the amount of money spent on office coffee, bring down printing costs and dramatically reduce the amount of energy consumed overall by the business."
If you do still need to maintain a physical office, you may wish to negotiate your lease options or move to a smaller space to account for the reduced number of in-office employees.
[Read: 4 Practical Ways to Stay Connected to Coworkers While Working Remotely]
Audit your software subscriptions
Many business owners rely on cloud-based tools to help manage their business. However, the monthly subscription costs for these systems add up quickly, so it's a good idea to periodically audit your recurring subscriptions.
"While $10 a month might seem really affordable at first, once you set up subscriptions for project management, accounting, photo editing, social media management, proposals, scheduling, etc., you’ve racked up a pretty hefty monthly bill," said Nerissa Zhang, CEO of The Bright App. "Opt for the free version of these online tools when you can and [find] one subscription that combines the functionality of several different services into one."
Scale down your variable costs
In the current remote-work climate, variable costs like office supplies, business travel and food can often be cut or reduced. Raquel T. Morris, chief operating officer of FinDec, recommends adjusting these items in your monthly budget as needed.
"By reviewing each expense item, I can determine what liabilities must be met versus what can be temporarily … scaled down," said Morris. "Although we all love snacks in the company pantry, cutting the budget by 25% makes a huge difference. Reducing travel and using Zoom … is a great way to save money and keep employees and clients safe. We have [also] found better deals online by simply spot-checking the cost of office supplies."
Automate administrative tasks
Instead of hiring a part- or full-time administrative assistant to shift "back office" work off your plate, try to automate things like invoicing, appointment scheduling, client follow-up and other manual tasks.
"Those very generic and mostly simple tasks can be automated with very little effort," said Alex Kehoe, co-founder and operations director of Caveni SEO. "Even complex internal data collection can be fully automated in the same way and used to augment other automation tools."
You can further reduce costs by investing in an automated live chat service as the first point of contact for customer questions.
"Live chat systems can help multiple customers at once and that's something an employee can't necessarily do," said Sturgeon Christie, CEO at Second Skin Audio. "You can be incredibly responsive … [and] offer a better overall customer service experience, [which] helps drive customer loyalty. The one-time investment … can save your business money, time and stress."
Negotiate with vendors
Vendors and suppliers are often willing to help out their small business clients and cut them a break to weather the current economic climate.
"Figure out if your suppliers can work on a net-term basis of 60 to 90 days or [offer] flexible monthly payment plans," said Richard Lin, founder and CEO of Thryve. "That way, you reduce risk in the business and stay on top of cash flows."
Samantha Anderson, co-founder and president of Origin 63, suggested reaching out to your technology and service providers and find out if they're willing to discount your subscriptions.
"Software companies may extend up to a 10% discount right now, and that means a 10% cost reduction," Anderson added.
[Read: Negotiating a Vendor Contract? Here's What You Need to Know]
Although we all love snacks in the company pantry, cutting the budget by 25% makes a huge difference.
Raquel T. Morris, chief operating officer, FinDec
Invest in culture to reduce turnover
You may have already stopped hiring new employees to save money, but it's just as important to focus on keeping the ones you have. Voluntary employee turnover costs U.S. businesses $1 trillion per year, so it's worth it to invest in culture initiatives that keep people around.
"Do what you can to raise morale and give staff members a reason to stay … even if you have to invest more elsewhere," Jason VanDevere, CEO and owner of Goal Crazy Planners. "I suggest more company outings, refresher courses and getting employees more directly involved in company goals to give them a greater sense of purpose."
Evaluate your marketing strategy
As a business grows, so does its marketing spend — but before you continue with your current strategy, evaluate each channel and campaign to determine your return on investment.
"Review your marketing mix [and] compare how much you are spending and gaining from each channel," said Irina Georgieva, co-founder and CEO of Enterprise League. "If, for example, you are investing a lot in PR … but you don’t see a significant increase in your website traffic, it is very likely that you are targeting the wrong marketing channel."
Georgieva noted that businesses should test and measure different marketing channels if you find one isn't working, then allocate your budget according to the data.
Tap into the gig economy
If your business has made the difficult decision to furlough or lay off full-time employees but you still need help completing projects, qualified freelancers and independent contractors can help you affordably fill those gaps.
"When you hire a freelancer, you do not need to pay for benefits … [and they] are willing to work for the fraction of a cost compared to full-time employees," said Drew Cheneler, founder of SimpleMoneyLyfe. "Shop around and … hire freelancers who put their money where their mouth is. Make sure your freelancer has a portfolio of previous work for you to review, a rolodex of customer testimonies and a flexible schedule."
Go paperless
If your business still relies on physical printing, try adopting a paperless, all-digital system to eliminate multiple printing-related costs and keep you better organized.
"A digital workplace that is less reliant on paper is cost-effective and good for the environment," said Sherry Mae Mandajos, chief marketing officer of Tankarium. "Information and data are easily accessible using the technology’s 'search and find' feature."
Hire an accountant
No matter how confident you feel in your business's budget, it never hurts to have another set of eyes. A professional accountant can offer an objective analysis of your budget and potentially help you save even more on overhead costs.
"[Our accountant] reduced company spending by 20% just from small things and waste alone," said Hosea Chang, COO of Hayden Los Angeles. "That taught me a valuable lesson: you have way more money than you think you do. If you sit down and review your spending, you can release all those funds, cut your spending and redirect the funds to other areas of your business."
[Read: How to Find the Right Accounting Firm for Your Business]
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