Ideas to Help Your Small Business Reduce Expenses

No matter what business expenses you have, there are opportunities to reduce them. In some cases, you can completely eliminate them, if you know how. Auto & General offers you this article to show you how to eliminate or reduce some business expenses.

It has always been our aim to provide clients like you with peace of mind. This is particularly important for small businesses that receive insufficient support to succeed in the tough world of business.

In this article, you’ll also find areas that are great for cost-cutting without lowering the quality of services or products you deliver. However, it’s very important to remember how small business insurance can be your biggest safeguard.

1. Take a look at your business expenses and re-evaluate your budget

You can’t take your business to where you want financially without first knowing where it currently stands. This calls for you to find where every cent of your revenue goes each month. Failure to do this is one of the reasons 82% of small businesses fail due to cash flow problems.

Once you know where your business stands, you can figure out where you want to take it. For example, you may evaluate your expenses and find that you’re making R500,000 in profit at an 8% profit margin. Since business growth is imperative if you are to survive, you decide to increase the profit margin to 10% over the next 12 months.

Having that goal immediately triggers a question in your mind: How do I achieve that 10% profit margin? The fastest method we know is to shave off expenses for items you can do without.

When evaluating your budget and expenses, you may have already identified a couple of expenses to cut. For example,you might be buying new equipment when the refurbished versions could work as well. Check also if

•  you're spending excessive amounts of money on lavish year-end celebrations

• your business is renting unnecessarily expensive office space

• you are spending a lot of money to recruit talent because of a high employee turnover

• your business is using expensive software tools when cheaper ones could do the same type of tasks as well if not better

There are numerous ways to cut business expenses depending on your type of business. Having re-looked at your budget, be ruthless in your approach to shaving off expenses. Some of the quick wins include the following ideas.

2. Outsource work

One of the quickest methods for cutting business expenses is outsourcing. To outsource means that you hire a third party to perform a task instead of recruiting a full-time employee to do the same job.

Outsourcing, therefore, can help your business cut employee costs, which is often a large component of your expenses. It also allows your staff to focus on the core business which can lead to improved efficiency and productivity.

This, in turn, can give your business a competitive edge over its rivals. The final result should be increased sales and, as an added bonus, it will help to avoid employee burnout.

There are many functions you can outsource. The most common are accounting and bookkeeping, human resources, payroll, software development, recruiting and customer services.

3. Move to marketing online and reduce paper use

Paper and the invention of the mechanised printing press by Johannes Gutenberg in 1455 changed the world. People all over the world could access reading material of various kinds.

The problem with paper is that it harms the environment due to the elimination of massive numbers of trees. Just to make one tonne of paper requires 24 trees. Unfortunately, the rate at which trees grow is slow, making it difficult to replace trees that are cut for paper-making.

Reducing paper usage will result in a decrease in the number of trees being cut down. Your business can contribute to this by reducing or eliminating the use of paper. This will also save you costs and help improve your bottom line. The simplest method to reduce paper usage is to use online services, even for marketing.

A complete stop from using paper might not be easy. Rather start by re-using as much paper as possible and printing on both sides of each page. If you use direct mail and spend a lot on postage, switch to email and save on both paper and postage costs. In addition, you can help the environment further by unsubscribing from direct mail lists and opting for email communication instead.

Your business may be using offline marketing methods such as magazine and newspaper press releases, flyers, brochures and business cards. The good news is that you can shift to paperless marketing using social media marketing, online press release platforms, blog posts and pay-per-click advertising. Doing so will help you reduce business expenses on items such as printing, labour for organising files, filing cabinets and toner for printing — with the additional bonus of reaching many more people.

4. Reduce business expenses by eliminating unprofitable products

How many products or services do you offer to your customers? Out of these, how many are profitable? If you offer multiple products or services, the answers to these  questions will reveal overlooked opportunities to reduce business expenses.

An unprofitable product or service steals money from your small business. What you may also miss is that it also wastes your time to make and sell it. By just removing this product or service, you instantly improve the profitability of your business and its cash flow.

What if you don’t have a product or service you can eliminate? The option is still there for you to negotiate costs with your vendors, including your banker. Negotiating lower interest rates on loans is one of the opportunities you can explore.

Before negotiating with a given supplier, contact at least three other vendors and ask for quotations. Be careful that each supplier will deliver the minimum quality you can get from the other vendors, so that you are comparing like with like. 

Use the lower-cost quotation as an anchor to negotiate with your current supplier. Let them know that you’ll move to the new supplier if they don’t at least match or preferably beat the other quotation.

5. Get small business insurance to be prepared for the unexpected

When you re-evaluated your budget, you may not have found the cost incurred due to unforeseen events such as theft, fire and natural disasters. The reason in many cases is that you’ve not yet become a victim of perils like these. However, when these events occur, the cost can be massive. For example, if a cyber-attack compromises your confidential information and the attackers ask for ransom, would you be able to afford it?

Many people think that cyber-attacks target only large businesses such as banks and credit bureaus, but this is not the case. It’s estimated that 43% of cyber-attacks are engineered to breach small businesses’ information technology infrastructure.

It’s reasonable for small businesses to protect themselves from such attacks by taking small business insurance. Not only will this enhance your peace of mind but it will also financially protect your small business if it is hit by unforeseen perils. Most importantly, all the hard work you’ve put in since the formation of your business won’t go to waste because your business will survive!

Get small business insurance from Auto & General

If peace of mind and staying in business matter most to you — and we’re sure they do — it’s important for you to get small business insurance.

It’s a simple process to get started with insurance from Auto & General. Go to our business insurance quote request page and fill in your details. You’ll receive a free, no-obligation small business insurance quote.