Trimming your business budget reduces the likelihood of running into cashflow problems, allows you to offer your customers lower prices, leaves more money for investing, and ultimately boosts your profit margins. Arriving at the decision to cut costs is easy enough. The hard part is deciding the exact expenses your business can do without. If you don’t know where to start, the following tips will guide you:
Spend less on office space
Depending on the location of your offices, renting out office space is one of the biggest business expenses. If the cost of office space is weighing down your business, it should be on the list of expenses to trim. There are different ways to do this. You can discuss the possibility of more favourable lease terms with the landlord.
Alternatively, you can move to a smaller office space in a less expensive area. If you have a lean team, you should also consider the possibility of remote working. You will save on office expenses and your employees won’t have to spend on daily commute. Another option is turning a room in your house into a home office.
You should also consider using a co-working space. Coworking spaces are especially suitable for freelancers and consultants, small startup teams, and digital nomad. At a coworking space, you will only need to pay for a desk and amenities, which will slash your administrative costs. The average cost of coworking spaces in Nairobi is KSh1,000 per day.
Minimise staffing costs
Payroll is a significant expense for most businesses. If you’re not maximising on your employees’ output, you’re losing money. Before hiring, make sure that each person is highly skilled and qualified for their tasks. Constantly review everyone’s workload and output to ensure that they’re pulling their weight. As difficult as it might be, let go of anyone who’s not pulling their weight.
However, in an effort to get the most from your employees, be careful not to overwork them. Overworking your staff will ultimately backfire as they produce lower quality work, become disgruntled, or even quit their jobs. It is important to also stay up to date on best human resource practices.
Also review the kind of perks you’re offering your employees. While perks and bonuses are a great way to reward employees, most employees might prefer having more time to spend with their families instead. Therefore, consider giving them extra off days or a flexible work schedule instead of bonuses.
Another way to minimise on staffing costs is by hiring freelancers and contract workers. Typically, freelancers and contract workers cost less than full-time employees. Additionally, you will save on taxes and other employee-related expenses. Small business owners can also take advantage of free or cheap labour provided by spouses, grown children, family members and friends.
Slash the marketing budget
With more and more customers turning to online shopping, you can cut your marketing expenses without harming your business. Take stock of all your marketing efforts including advertising, public relations, social media marketing, and marketing events. Identify which areas are taking up significant money and staff hours without producing results. Once you identify the wasteful marketing efforts, you can cut them out and focus on the productive forms of marketing.
For example, instead of paying for billboards, you can pay for social media ads. You can also work with a local influencer to promote your products or services. Other cheap ways to market your business include cold calling, asking for referrals from your customers and clients, and giving out your business cards.
Cut supply costs
Have you been using the same supply chain for years? You might be missing out on good bargains from other vendors. Invest some time and effort into researching new vendors and wholesalers and their prices. If you have a niche business, you might be pleasantly surprised to find there are more vendors in your category than when you first started business.
As a long-term customer, you can also approach your current vendors to renegotiate your terms. They probably wouldn’t want to lose a loyal customer and will be willing to offer either discounts or add-ons that save you a significant amount of money.
Another way to save on supply costs is by co-opetition. This is where you pool resources together with other businesses to save on the cost of supplies. For instance, you can pool with similar businesses to import your goods together, which will lower the cost of importation. This strategy can also be used in other business aspects such as sharing office space or joint advertising.
Embrace DIY solutions
Hiring a professional will get you the best results, but you can get good-enough results by doing some tasks on your own. For example, if your small office space needs a new coat of paint, you can do a fairly good job with a bit of research and patience.
You can also create your online store using Shopify rather than hiring a programmer. You can research on keywords for your online content instead of hiring an SEO expert, and design your own marketing material on Canva instead of hiring a graphic designer. If you put in the time and effort, you will get close to professional quality, learn a new skill, and save a significant amount of money.