Ask almost any entrepreneur about their business, and their passion and drive will become undeniable. Many small businesses wouldn’t exist without the enthusiasm and motivation to start something new or fix a problem. However, passion and drive aren’t enough to keep the lights on and things running smoothly.
It takes one crucial thing to ensure success and longevity. That thing is sufficient cash flow, and it’s something many business owners struggle with. To increase it, companies can work on boosting sales or reducing costs.
While it’s harder to guarantee revenues, businesses can control expenses by streamlining and choosing new processes. As the year comes to a close, you can set the stage for increased cost efficiency by targeting select business practices. With some of the tips below, your company can make even smarter financial decisions in 2022.
Prevent Downtime and Outages
Nearly every business relies on data and technology to keep things running. You collect information from clients and employees, exchange data with suppliers, and use software solutions that house it all. Working with data and tech makes your operations more competitive and sophisticated, but all that information can cause problems.
Duplicate entries, typos, and outdated and unused information could end up causing glitches in the technology you rely on. Some glitches are minor inconveniences and require only a few minutes to clear things up. Others end up as major mishaps that lead to large downtime and outages, hurting your firm’s pocketbook and reputation.
Investing in tools and solutions, such as data observability, help you predict, prevent, and fix quality data issues before they escalate. How is spending money on AI-based software and technology going to cut expenses? Consider what supply chain disruptions, slower operations, and downtime cost you. In a lot of cases, it’s more than just sales. It’s also employee morale, customer loyalty, and the ability to sustain business partnerships.
Diversify Your Marketing and Advertising
Opening up shop and expecting people to come through the door without advertising is unrealistic. You need to get the word out about your business, educate consumers, and remind current customers why they should return. Marketing budgets may eat into some of your revenues, but there are ways to strategically spend your advertising dollars.
Traditional radio, television, billboards, and print ads might reach your market, but they often carry larger costs than digital advertising. Shrinking ROI with traditional forms of marketing is the main reason digital ad spending is growing. Digital marketing now makes up 58% of marketing budgets, according to The CMO Survey’s August 2021 report on marketing trends. However, spending money on all or certain forms of digital advertising may not make sense.
Some businesses realize increased ROI from online videos and blogs that drive organic traffic to their digital storefronts. Others harness the power of public relations through features in popular online publications and related news stories. For instance, internet service providers in small communities might ask to be featured in articles about the digital divide. SEO, email campaigns, online events, and guerilla marketing are additional low-cost methods.
Determining what marketing efforts are producing the highest returns will help trim budgets. Why continue to put money and time into an ad strategy without good results? Cut your lowest performers and concentrate on the outreach efforts that bring in the most business.
Optimize Labor Costs
Companies need employees’ expertise and productivity to grow and meet customers’ needs. However, full-time workers may not be necessary for every task or function. You might be overspending on wages, benefits, and payroll taxes for staff you don’t really need. Signs can include uneven workloads and extended periods where employees are looking for something to do.
Businesses that experience ups and downs in available work often benefit from using independent contractors and consultants. Owners can negotiate hourly or project rates with contractors, sending work their way when things pick up. Companies save by not spending on labor when it’s slow. Business owners also cut down on other expenses, such as providing workspace, equipment, and training.
Besides outsourcing tasks to experienced consultants, some companies save by working with interns. Hiring interns from nearby high schools and universities for entry-level work lets you trim labor expenses. Interns are looking for ways to gain experience, apply their knowledge, or get their foot in the door. Your business will expand bandwidth and get routine tasks out of the way without having to overburden existing staff.
Negotiate and Examine All Expenses
Other than labor and advertising, your business spends its money on supplies, facilities, and everyday perks. The office coffee, utilities, printing services, and website hosting fees add up. Start examining everything you’re spending, whether it’s a monthly, annual, or occasional expense. Ask if each of these is necessary, if there’s a lower-cost alternative, or if you can renegotiate the price.
Free coffee, juice, and soda in the office may be nice to have, but are employees really benefiting? You can probably stop providing this perk if there are a lot of leftovers or employees are working hybrid schedules. If you have multiple offices or facilities, does it make sense to keep them all? You might be able to consolidate by offering remote work arrangements and moving staff into fewer locations.
It’s also beneficial to look at all the services and equipment you secure from vendors. Perform a cost comparison and see whether there’s another supplier that can offer a lower price. You can talk to your existing vendors and ask whether they’re willing to renegotiate. Some may offer a lower price to keep your business.
Revisiting your budget each year will identify areas where you may be overspending. As business needs and dynamics change, it doesn’t always make sense to keep doing things the same way. By addressing wasteful expenses, you’ll maintain better control over your cash flow and, ultimately, your ability to stay in business.