For most business owners it always seems like prices are increasing. That may be so, however, as part of a wider business improvement program, you should always aim to find cost savings within your business.
Starting a cost reduction program can seem daunting, there are a few keys areas you should be able to find cost savings that will yield results within weeks of implementation and bring a long lasting change.
Below are 6 ways to reduce costs without a loss in productivity.
1. Redefine how and where your business operates
Small changes will only result in small savings. If you are looking to make significant cost savings in your business you need to look at your whole business and try and redefine it.
Premises and staff costs are the largest costs in most businesses, to achieve substantial cost reduction with your business you need to redefine where, how and with whom your business operates.
Many business owners believe they should locate their offices in a central, well-known location as it adds prestige to their business. For some businesses such as retail, location is crucial for business success. However, for most businesses, a central location is not essential because what drives sales is the product or service, not the location.
Conduct an assessment on what drive sales to your business if the location is only a minor factor consider moving offices to a cheaper location.
There are lots of serviced office options to choose from, this will give you an opportunity to reduce utilities, repairs and maintenance. Many serviced offices come with shared IT resources, which will allow you to reduce your IT spend.
The popularity of mobile phones, laptops and tablet computers is driving businesses to implement Bring Your Own Device (BYOD) programmes. Instead of buying expensive hardware for your employees you invest in the IT infrastructure to enable them to use their work on their own devices. Even if you contribute to the hardware costs for employees, a well planned and marketed BYOD programme can save money and improve employee satisfaction.
If your employees can work remotely, assess whether they all have to work at the same location at the same time to be productive. Allowing employees to work flexibly from home could give you the opportunity to downsize your premises and implement a hot-desking policy in the workplace.
This not only reduces the potential cost to your business but can also increase employee satisfaction which could increase employee retention rates which could consequently save you money on recruiting and training new staff.
Once you can get your employees to work from home, think about whether your staff needs to be UK based. Labour can be much cheaper abroad especially in Asia. Think about getting some of your costs outsourced – by a company or managed through freelancer web or by crowdsourcing
Review your current business processes, can you do things differently? Can you improve your processes so you perform the staff tasks with less staff?
People are put off of outsourcing because they feel they are losing control but they forget they are gaining more time to focus on what is important to their business.
2. A Grip on your Overheads
Energy prices are increasing but this does not mean that savings cannot be made, not enough businesses challenge and interrogate their utility bills it isn’t good enough to just accept that prices will increase. Many multi-site businesses are on different tariff and have inconsistent billing based on estimates and often find it difficult to recover money from utility companies.
Better overhead cost management comes from understanding consumption in each unit and monthly trends, try to gather this information for at least a year.
Get control of your utility bills by analysing how much energy you have consumed over the past year and how much money you have spent.
First, you should use this information to decide how you can reduce consumption. Think about how and when you consume energy, challenge any assumptions that have been made and focus on reducing consumption.
Second, you should try to broker a new deal with a new supplier. Knowing just how much you have consumed in the past year, and how much will consume will help you get the best deal possible from a new supplier.
If you are using separate suppliers for gas, and electricity try to merge this into one and use increased bargaining for leverage to negotiate a better deal. The same method can be used for telephony and broadband.
3. Renegotiate Contracts
Assess all of your contracts and try to shop around. For instance, business insurance cannot be avoided, but ensure you review your policy annually and make sure you are getting the best possible price.
Shopping around with other suppliers may take time but it could save your business thousands every year.
4. Cloud Computing
Review your IT infrastructure and software strategy, moving your business to the cloud could reduce your IT spend significantly.
Infrastructure & Platform as a Service (IaaS/PaaS) can save businesses thousands on hardware and software costs. Flexible and scalable payment options ensure you do not waste valuable capital on expensive software and equipment.
Replacing physical servers with virtual services can also help you reduce energy costs and lessen your carbon footprint.
Infrastructure as a Service (IaaS) companies provides support to their customers which could give you the opportunity to reduce IT support staff costs.
Software as a Service (SaaS) provides small businesses with enterprise level solutions at fraction of the price.
5. Use time and space more wisely
Travel should be restricted to sales meetings and business critical meetings. There are many great web conferencing and video conferencing solutions out there that will save you money.
6. Think Outside the Box
Every business is different, keep thinking of ways to improve processes and reduce costs. Have a monthly meeting with employees to think of new ways to save money and improve productivity. Offer employees’ incentives to come up with ideas, it will save you money in the long term.
Times are tough and to pull out of things businesses should look to reduce costs, this is often deemed negative but you should see this as a positive action as you are making your business more efficient.
Redefining how your business operates forces you to access your value proposition and makes you more competitive and hopefully more able to provide your customer’s value.
Make Your Business A Success
The key to a successful business can be found in our Business Success Formula. If you structure your business using the Business Success Formula as your blueprint you will decrease your chance of failure significantly.
We assess your business and implement our business success formula in our business assessment service The Business 360. It provides you with all the information to 10x your business in a matter of weeks. You can check it out here.