How To Reduce Operating Expenses in Business: 11 Useful Tips
There are many reasons a business owner wants to cut down operational costs. In this entry, we’ll provide 11 useful tips by diving into the following areas of your business:
Employees
1. Increase Employee satisfaction One important but often overlooked solution to decrease operating costs is by increasing employee satisfaction. Research has shown there is a positive correlation between employee satisfaction, productivity, and firm performance. When employees feel neglected and burned out, they tend to feel demotivated to work, thus, lowering productivity and increasing operating expenses. 2. Hire interns In today’s market, many young talents are looking for opportunities to grow and gain experience. Hiring paid interns will not only help them but also you for two reasons: (1) You can cut salary costs for roles that interns can accomplish compared to hiring a seasoned worker. (2) If you’re planning to absorb interns to full-time, you have the opportunity to evaluate their work at lower rates (3) Interns can be hired at affordable starting rates which are perfect for businesses that aim to reduce recurring expenses.
3. Provide Training
Unskilled employees can drag work for the team. From the start, you should provide proper training for your new hires so they understand and meet job expectations. I’ve seen many business owners fail to provide this so they end up doing the tasks themselves or they add new team members. You can definitely cut down your operating costs if you efficiently maximize your current team’s workload.
4. Outsource
There are many aspects of running a business that you are not an expert on, thus, you need someone who can help. The problem is, you can’t afford it right now. Thankfully there is an effective solution for that - outsource!
For example, unless it’s part of your core services, you don’t need to hire permanent employees to do your accounting, payroll, or IT requirements. You will get the expert service you want at the lower cost you need.
Office expenses
5. Work from home Due to the pandemic, you might have experienced running your team mostly from home. If your business is not client-facing, have you considered switching to a work-from-home setup permanently? Many companies, like Ford, are opting to let some of their employees work remotely beyond the pandemic. This can be a huge-cost saving option, as you can save from paying office-related expenses. 6. Get the right software
Using manual or outdated system process significantly cuts down business performance. These days, there are many SaaS solutions you can choose from. Having the right tools and using them efficiently will help your business in the long run. 7. Be eco-efficient One way to reduce expenses in your business is to have an energy-saving strategy. You can implement electricity-saving policies or invest in green energy options. These simple tweaks will make a huge difference in your monthly bills. 8. Hold virtual meetings For businesses with teams at different places, you can cut a portion of your expenses if you host virtual meetups instead of holding them in person. Although there are important meetings that are better held in person, some meetings are better hosted online. Aside from travel expenses, you will spend less on logistics matters as well.
Network Capital
9. Build Relationships
In the long run, the relationships you build with other business owners and professionals will help you. Ask any successful entrepreneurs out there, all of them have people who have helped their journey one way or another. Quoting Michele Jennae,
"Networking is not about just connecting people. It's about connecting people with people, people with ideas, and people with opportunities."
Knowing the right people can make a huge difference in solving your operational cost problems. 10. Encourage referrals
You can reduce the cost of marketing if you maximize the use of referrals from your networks and former clients. As Mark Zuckerberg famously said,
"People influence people. Nothing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising."
Customers
11. Fire Unprofitable Customers
Most business owners think that more customers equal more profit. The truth is, there are customers who might be using too much of your resources while providing little benefit. At the end of the day, you need to manage how much you’re spending with each customer so you can allocate resources effectively. Ìf a customer is hurting your business, let them go.
How can an outsourced CFO help you reduce operational costs?
An outsourced CFO is your finance partner who can help you cut expenses in 2 ways:
Identify hidden costs - Being an insider of your business, it’s actually common to miss where your problems lie. This is the main reason why writers have copywriters review their content. In your case, an outsourced CFO is your expert eyes that can help diagnose your finance issues.
Strategic planning - Your outsourced CFO is in charge of overviewing all your business finances. Thus, It makes perfect sense that he knows where your money problems are (probably more than you do). Part of your CFO’s job is to come up with ways to resolve these issues and increase business growth.
Hopefully, the above tips will help you cut down operational costs for your business. Olos Consulting Group (OCG) provides toptop-notchnotch and cost-effective accounting, tax, and CFO services to startups and small businesses in the Philippines and Southeast Asia.
Book a free consultation with us here here oror send us an email at info@olosconsultinggroup.com