For many small businesses, regardless of its stage of growth, there are usually a number of standard monthly costs that always seem to dig into the business’ bottom line profits.
Whether it’s vendor and supply costs, marketing and advertising costs, human resources costs, or otherwise, these costs are a pain to deal with, yet they are necessary to the fundamental operation of the business.
As a company that provides business financing to many different types of companies, we at Direct Capital have a great interest in helping our clients maximize their financial strategy at the operating cost level. To that end, we set out to learn more about effective operating cost strategy, and more specifically, what business owners can do to effectively reduce their overall operating costs. To do that, we asked 28 small business finance experts the following question:
“What’s the #1 way small businesses can reduce their monthly operating expenses?”
We’ve collected and compiled their expert advice into this comprehensive guide to managing business operating costs. See what our experts said below.
Meet Our Panel of Small Business Finance Experts:
Slavy Slavov is Co-Founder of Equafy, a cross browser testing automation service. He has over 10 years of managerial experience working for companies like Experian and OrderDynamics. In the past he managed the quality assurance organization of Experian in
Bulgaria, Monaco, UK and Malaysia.
Small businesses in high tech usually have 3 main areas where they spend majority of their money – employees cost, infrastructure cost, marketing and advertisement. All the rest is minor, even the office related cost is minor. Main area for improvement in most small businesses for reducing costs is…
The mix of marketing, advertisement and employee cost.
What I mean: As small business people try to save money and do a lot of stuff on their own. They don’t realize how much pain and effort is this. They practically waste money. We did it too.
We started doing advertisement on our own, experimenting with ads. Spent some money, then we decided we want to do it properly even for some cost. For 10-15% on top of the ads cost as margin we’ve got some pro guys doing it, instead of posting 10 ads they posted 200 pro ads and narrowing them to the most optimized. If I’m to do it? I’m lost! I either will fail or spend a fortune.
That way cost per conversion became much lower even we were “wasting” money for external services. People shall really focus on what they do best and leave the pro guys doing the rest. Utilizing hot startups for such activities is even better, they are eager to get customers so doing a lot of stuff for lower rates and they are not corporate yet so their cost is more balanced.
Optimizing such effort and using creativity for marketing can really cut cost and allow this saving to be reinvested in what it really matters for small business – more customers.
Chuck Richards is the CEO of CoreValue Software, a software company based in Norwich, VT that helps business owners and CEOs learn the valuation or operational and financial health of their firm.
It may sound obvious, but the smartest way to reduce your operating expenses is to…
Improve the performance of your operations. To accomplish this, you must be able to measure the areas of your operations. With these measurements, you are able to see the results of your improvements.
In assessing your operational performance, you will naturally uncover areas for improvement. For example, you may find that you don’t have contracts in place for your suppliers. If you did, they could be used as a tool to negotiate better prices and buying power.
An assessment will also show you areas where processes are either undocumented or inefficient. After documenting your existing processes, you may consider creating new processes, such as a margin improvement process that is done monthly or quarterly. With formal processes, you can measure operations much more granularly. Analyzing the data will help you fine tune your operations, which improves operational performance and minimizes operating costs.
An added benefit of measuring and documenting your operational performance: a reduction in perceived risk. Your business will appear much more attractive to lenders, opening doors to better capital.
Korey Lind is the CEO of Third Wave Business Systems, a firm that specializes in the implementation of business management systems and a leading developer of SAP Certified Integrations for Business One that extend the power of the SAP Business One platform. Korey founded Third Wave Business Systems in October of 1993 after years in the computer software industry, including some time with Price Waterhouse’s consulting group. Her hands-on leadership assures that every client gets the quality service and products they need to help their businesses run more efficiently and profitably. Korey is a member of SAP’s Partner Advisory Council.
In order for a small business to reduce their operating expenses, it’s crucial to…
Take the steps to automate processes, put audit trails in place, and provide relatable data that is immediately accessible.
We’ve seen countless small businesses try to solve this by trying to integrate new solutions to their existing accounting program. But this is a temporary solution and as the orders come in, business-critical processes take longer to complete. The volume slows everything down and they’re unable to open new business channels because the solutions really don’t integrate well with each other.
Neither spreadsheets nor non-integrated applications can compete with the added value an ERP system brings to the table, making this the most effective way to reduce those operational costs. The right ERP system supports processes across the enterprise including supply chain management, customer relationship management (CRM), finance, and human resources, providing measurable improvements in all of these areas, both from an operational and financial perspective. A business is able to operate from a single source of data, in real-time, reducing the risk of errors and omissions.
The key factors that most small businesses don’t realize are possible to attain with the right ERP solution include:
* Gaining Business Intelligence
* Expanding Into New Channels
* Automation of Key Processes to Cut Costs
* Tracking Prospects & Customers
* Benefiting from Long-Term Support
The sooner an ERP system is implemented, the sooner it can reduce operational costs, increase visibility, and enable a small business to be more connected to what’s going on in the organization.
Hamilton Powel is the CEO of Crown & Caliber, LLC, a luxury watch consignment company based in Atlanta, GA, which he founded in early 2012. He is also the managing member of Powell Growth Capital, LLC, the funding source of Crown & Caliber.
For small businesses, every penny counts and there are many ways for smaller companies to cut costs. At Crown & Caliber, we found that the best way to cut our operating costs was…
Through the use of technology.
Through the use of technology, we were able to streamline and perfect our processes, decreasing the number of people we needed to complete certain tasks and cutting overhead costs.
Also, the use of technology has made it easier and simpler for our customers to reach us, cutting the amount of our budget that we have to spend on marketing and advertising efforts. Now that we have used technology to perfect our processes, we are able to be significantly more efficient with our time and efforts.
Melanie Angelis MS CAM, is the founder of The Grecian Garden, a natural wellness company providing education and consultations so clients can live a nourished life.
For small businesses, one way to reduce business costs is to…
Know a little bit about everything.
This doesn’t mean you have to code the website and do taxes by hand, but it’s difficult to evaluate work you delegate out of your hands unless you have a rudimentary idea on how every facet of your business works. Otherwise, you lose the communication and nimbleness that makes small businesses so effective compared to the bureaucratic tendencies of larger companies. This approach also lets the owner correct mistakes and guide employees along the right path before disastrous errors can occur.
Jim Gustke is the VP of Marketing for Ooma, a consumer telecommunications company based in Palo Alto, California, and is a marketing and Internet veteran with a wealth of experience at the intersection of consumer and technology marketing. Previously, as Vice President of Marketing for Intuit, he helped lead the reinvention of Quicken and launch the first SaaS version of the popular personal finance software. Prior to Intuit, Mr. Gustke was responsible for business unit management, global branding and product marketing at Lexar Media, helping grow the flash memory company to over $850 million before its acquisition by Micron Technology. A pioneer in Internet marketing, he joined America Online in 1996 as the marketing leader for GNN, the company’s first Internet Service Provider, and in 1995 as a marketing manager at Polaroid Corporation he led the team that launched the company’s first corporate web site.
Small business can reduce expenses by…
Utilizing new innovative tools to help them with marketing, finance, communication and productivity.
* Marketing – Easy website hosting platforms, like Weebly, combined with free social media tools such as Twitter, Facebook, Instagram and LinkedIn, make it easier for than ever for small businesses to reach, connect and market themselves to target audiences.
* Finance – Cloud-based accounting tools and better small business financial planning solutions, like Sage One, can make it easy for small businesses to allocate resources to grow their business while keeping an eye on the bottom line.
* Communication – Great communication online tools, like Constant Contact or Paperless, make it easy to share electronic news blasts with customers. Voice-over-IP (VoIP) technology, like Ooma Office, allows small businesses to utilize their high-speed Internet to connect with customers, vendors and employees through affordable business phone services with features like virtual receptionist, extension dialing, conference bridge and multi-ring that present a polished, professional first impression.
* Productivity – Mobile apps, like Evernote and Google Docs, can help businesses stay organized through document sharing over the cloud and keeping track of to-do lists.
Sara S. Helmy is the Chief Executive Officer of Tribu, which she founded in 2011 at age 22. Tribu is a Strategic Communications Studio dedicated to creative advertising & branding that produces majestic results and breathlessly competes amongst today’s competitive clutter.
One of the best ways we at Tribu help promote the reduction of operating expenses is to…
Empower our employees to question process and procedure.
If you train your team to understand their impact on the bottom line, and then further empower them to take action in promoting operational efficiency they will often surprise and delight you.
Because they are the soldiers standing in the “front of the line” they often know best how they can help the company improve operations, freeing up valuable time. It’s a simple truth, but many companies can benefit simply just by listening to their staff and providing them the freedoms to modify processes for the better.
Best of all, it also helps encourage a better overall work environment and creates loyalty by demonstrating to company staff that their ideas are authentically valued.
Brian Gatti is a Partner and Senior Marketing Consultant at Inspire Business Concepts, an agency that blends marketing with operations to provide clients with comprehensive solutions. Brian has extensive experience in sales, marketing, and operations, with an MBA from Thunderbird International School of Business.
Businesses looking to reduce their operating costs should focus on how to reduce their cost to acquire new customers. One of the biggest expenses we see for our clients is that they spend far too much per new customer, which drastically cuts into their profit margins. We recommend that companies…
Conduct audits of their marketing channels.
This may require implementing some tracking framework if there isn’t one already (call tracking numbers, email marketing platforms, Google Analytics, etc.).
Once the audit has been conducted, identify low performing channels (cost is too high vs. the profitability of the product/service) and address/eliminate them. For example, if your company is running a Google Adwords campaign for Mountain Bikes (priced 599.95) and you spend $7 per visitor to your landing page. Let’s also say that your conversion rate is 2%. This means you’re spending $350 just to get a sale.
Your costs are too high because your conversion rate is too low (2% provides a 50 times cost multiplier for your click costs). In this scenario, you’re either attracting the wrong kind of people (which means your ad copy must be addressed) or your landing page is not doing a good job of converting them.
Either way, a change must be made (and tested). Increasing your conversion rate from 2% to 5% is not only realistic; it also drops your cost to acquire to $140.
Paying attention to advertising and marketing can help dramatically impact operating costs of a business by increasing margins or allowing a company to reduce required advertising expenditures for the same cash-flow results.
Bill Hughes is a CPA and business manager with over twenty years’ experience and is Managing Partner of Business Allies Group, LLC, a business consulting firm. Bill also currently manages a large medical practice that has consistently been ranked by the MGMA as one of the top performing medical practices in the nation. Bill specializes in preparation of personal and business income taxes. He has been quoted in professional articles, and has presented programs on budgeting, cost containment, and employee morale.
I have managed different types of businesses and helped others manage their business and the number one way to reduce operating expenses is…
By having owner and employee accountability.
In this, I mean that you have to create an atmosphere in which you have hired accountable people, and put in place policies and levels of supervision to ensure the accountability.
This day and time, labor is usually the largest cost to a small business. Once you put on top of that excess hours, overtime, PTO accrual, payroll taxes, benefits all tied to hours worked, retirement plan expense, employee work hours that are not spent productively by accountable employees can cause operating expenses to spiral out of control.
For example, if you have an average workforce pay rate of $20 per hour, ten people each being unproductive for 15 minutes per day, it adds up to $13,000 of payroll expense annually, not counting the payroll taxes and related overhead of the employee. So, to control this, a manager/owner must control people on the clock when they aren’t working and have policies in place to prevent this.
I have implemented things such as no skipping lunch unless pre-approved, no clock in prior to ten minutes prior to start of day, or clock out more than ten minutes after the end of the day, without pre-approval. This will usually eliminate a large amount of payroll expense related to hours worked, and can also eliminate or reduce overhead. Accountability also works well on the people you have ordering office supplies and expendables for the workplace. Having a purchase order system or supervisory approval prior to placing supply orders will control costs and foster accountability.
Nicole Munoz is the CEO of Start Ranking Now, Inc., a successful SEO and marketing company that she founded in 2008, where she has helped hundreds of business owners achieve the same success she has. Nicole owns and operates two online businesses, has written 12 books and she’s one of the most in-demand speakers and Marketing Consultants, speaking at least 20 times a year at marketing conferences across North America.
The #1 way small businesses can reduce operating costs is to…
Review their expenses and cancel any services or technology they have not used in the last 90 days.
Many times business owners will have employees sign up for products or services and then forget they ever subscribed to them. This especially happens with small business owners that are not doing a monthly profit and loss worksheet.
Other times, the business owner assumes that their employees are using a product or service but in actuality they are not. Employees are not going to remember and say to the business owner, “Hey boss, remember that service we signed up for 6 months ago… well we never actually started using it!”
Another scenario is when new products or services will actually duplicate other services. For example Infusionsoft is an all-in-one marketing automation software that covers a shopping cart, CRM, and email marketing or marketing auto responder software. Business owners that sign-up can usually eliminate three services they were paying for individually, eliminate duplicate and increase productivity.
Jon Zimmerman is CEO and co-founder of Front Desk, a rapidly growing software-as-a-service (SaaS) platform that provides mobile-first, cloud-based client management tools to small- to mid-sized businesses in the personal services economy. Before FrontDesk, Jon developed airline yield management systems for United and KLM, led teams to support marketing and pricing at Expedia and T-Mobile, and co-founded L1, a quantitative hedge fund. In 2005, Jon invested in CrossFit Seattle, the first CrossFit affiliate, which enabled him to see the pain points and heavy administrative burden associated with starting and growing a personal services business. Dissatisfied with the inadequate, costly and desktop-bound client management software available to manage his gym Jon, along with five others, founded Front Desk in 2011.
The number one thing small businesses can do to reduce their operating expenses is to…
Instead of cobbling together a host of various components such as payment processing from one vendor, email marketing from another, scheduling from yet another, etc., look for an integrated software solution that fits all or most of their needs.
An integrated solution not only can save small business owners money but also time. With just one solution managing their business, owners will be able to simply and accurately track their sales, manage scheduling, process payroll and payments, and so much more. The money saved by only paying for one software solution will be great and the time saved will allow small business owners to spent their time with their customers and not at their desks.
Hezekiah Herrera is an accredited public relations professional who specializes in small business development. He is also serves as Chief Communications Officer for a small business funding firm nationally headquartered in San Diego, California and is an active member of the Public Relations Society of America. You can connect with him on twitter: @ForagePR.
In my opinion, the #1 way small businesses can reduce their overall operational costs is to…
Invest into an effective public relations program/strategy.
Public relations, according to James Grunig and Todd Hunt, is a management function that identifies, establishes, and maintains mutually beneficial relationships with its stakeholders. Stakeholders can be your customers or your competitors—anyone who has a stake in the success or failure of your business.
With a good public relations program, a small business can cultivate earned media, cutting down on advertisement and placement costs. Public relations research can produce data that can impact the way a small business interacts with its customers, vendors, and employees—even how it responds to competitors.
Instead of reacting to a crowded market by splurging on ads and slashing prices, public relations attempts to identify what’s important to stakeholders and develop mutually beneficial relationships that will thrive beyond a holiday season. It cultivates customer loyalty, allowing the business owner to cut down on costs associated with attaining new customers when money is tight.
In other words, a small business owner gains access to insight that encourages effective budgetary decisions with tangible impact on operational costs while maintaining service quality.
Michelle Geib is Co-Founder and President of www.XperienceDays.com, an online gift card retailer which offers 1,000s of unique activity based gifts in the form of gift certificates. From Food Tours to Racecar Driving, Flight Lessons to Wine Tasting, Skydiving to Dinner Cruises, the range of experience gifts offered across the Country includes both the relaxing and the heart-pounding.
The number one way small business owners can reduce their operating expenses is…
To actively look for ways to save.
Many business owners don’t take the time to analyze their operating and overhead costs until they are at a point of financial desperation. Be proactive by making a list of monthly and annual expenses sorted in order of expense.
Then calculate what that each expense category represents as a percentage of profit. Reviewing the expense categories in relationship to one another as well as to profits will help business owners focus on where they should and need to be looking to save.
David Johnson is the Founding Partner of ACM Partners, a boutique advisory firm advising small and mid-sized businesses. He is an expert in performance improvement, turnaround and restructuring, and has several articles and speaking engagements to his credit.
The #1 way small businesses can reduce their operational costs is to…
Identify ways to maximize efficiency by properly outsourcing.
Many small businesses struggle with inefficient cost structures for the simple reason that they try to do too many things, and end up doing them poorly. Non-core functions can often be better filled through an outsourced model, with one employee serving as the point of contact for a team of services providers.
The function(s) to be outsourced will vary by company, but a general rule of thumb is that any function that does not lend itself to strategic differentiation should be outsourced. Theses functions can include: Accounting, Finance, Human Resources, Information Technology, Logistics, Marketing, Sales, etc.
A well-structured outsourcing arrangement can result in both lower costs and higher quality. Additionally, by switching the fixed costs of employees for the variable cost of an outsourcing arrangement, companies can increase their financial flexibility.
Athena Karsant is an internationally renowned master cosmetic, corrective and paramedical tattoo specialist who has been featured onThe Emmy Award-Winning television show, The Doctors TV. She performs the standard permanent makeup procedures, as well as corrects botched permanent makeup procedures. Additionally, she has built her reputation on the paramedical work that she does, including scar camouflage, areola repigmentation, and her work with burn survivors. Athena has offices in Beverly Hills, Newport Beach, and San Francisco, CA. Learn more about Athena at her website, Fooling Mother Nature.
The #1 way that I reduce my operating costs each year is…
To call around to different companies and suppliers to get the best pricing for the best services.
For example, if one company is offering a service at a certain price, I will call one of their competitors requesting a quote and informing them of the other quote I had received. Typically, they will come in either with a better price or more included with their plan. Then I go back to the original company I spoke with and inform them of the other quote and see what they can do. This can work with insurance, phone bills, credit card processors, etc.
Paul J. Wallin is a Criminal Defense Attorney and Founder of Wallin & Klarich, a law firm that is recognized as one of the most well-respected and competent criminal defense law firms in California. His firm has about 40 full time employees, including 12 lawyers, and has offices throughout Southern California.
To reduce your operating expenses, you have to…
Have a solid business plan that you stick to.
You have to ask yourself, “How can I merge two positions in my business and have one employee trained to do both jobs?”
Often, you will find that you have a need for a certain type of employee, but not a full time need. Merging two positions into one will cut your payroll, as well as eliminate a benefit package for one employee.
Of course you need to also look at every single expense you currently have in your business and ask the question is that expense necessary. If the answer is no, cut it out immediately. If the answer is yes, then there are always things you can do to cut that needed expense down.
Recently we cut our cell phone bills down by $700 per month merely by having our IT staff member push our current provider hard and tell them that we were going to change providers if they didn’t reduce our expense. This can work with almost all of your suppliers. In 2014, nobody wants to lose a good paying customer, and they will almost always negotiate.
Jeremy Levy is the Owner of GiveJet, a Jet Charter brokerage firm, with over 15 years of experience in the private aviation sector including aircraft charter, aircraft sales and parts sales. He is also a licensed commercial pilot and graduate from Embry-Riddle Aeronautical University.
The #1 way small businesses can reduce their operating expenses come in the mail monthly…
Every month when you receive your credit card bill, take a ruler and slide it down the page. Any charge that you don’t immediately recognize as a necessary expense, highlight and consider cancelling.
As small business owners, we tend to skim our credit card statements since it’s an unpleasant act to look at all those charges. Also small business owners wear so many hats that we simply don’t have the time. But if you can eliminate $200 per month by taking 30 minutes to go through your credit card bills, then that’s certainly time well spent!
Paige Dawson Rodriguez is the Founder and President of MPD Ventures Company, a comprehensive marketing & communications firm. In her leadership role, Paige works with executives and entrepreneurs throughout the country to develop key messages, marketing strategies and measurable campaigns, driven by client business goals. She has extensive experience providing counsel for professional service firms, technology companies, associations and nonprofits.
In terms of one tip for reducing operating costs of running a business, our number one savings was…
Switching our payroll provider – the savings are dramatic. With a freelance payroll provider versus the online service, we were spending easily 3-4x as much monthly on service.
We recently moved from our bookkeeper handling payroll to an outsourced solution with Payroll On A Budget. The service is simple to use and a TREMENDOUS cost savings for us at $19.95 per payroll and then $1.25 per payment (i.e. paycheck). The fee includes all the tax filings and payments as well as the year-end W2s.
This specific service is targeted for businesses with 20 or less employees and they have a sister company, Custom Payroll, for larger needs. In comparison with others, the rates are 20-50% less than what we’ve seen with ADP or Paychex.
Boris Kontsevoi is the President and Founder of Intetics Co, a global sourcing company. Under his leadership a group of software engineers developed into an international technology company with multiple professional certifications and industry awards, including Top 100 Outsourcing and Top 100 Global Services company. Intetics Co is a leading software development and IT outsourcing company, with offices in USA, Japan, UK, and development centers in Eastern Europe.
The #1 way small businesses can reduce their operating expenses is by…
Concentrating on their core offering.
They need to figure out exactly what their service or product is; they need to find their competitive advantage. Things that are not their core can be outsourced to companies that do offer that as their core expertise.
For example, if they don’t specialize in application development, why go through the process of finding specialists and developing themselves, if they can get a better product quicker and cheaper by working with a provider? In the end, the small business will receive a better product and save along the way if they outsource their non-core functions.
Working with a third-party will help them save on operating costs because they don’t have to worry about paying for licenses, computers, certifications and a milieu of other things that they would need to get the project done professionally. This is especially true of they don’t have an interest in building out that portion of their business in the future. If they find the right partner to help them complete their projects, they will experience significant reduction in operation costs. They will be able to develop and concentrate on their core advantage, but also limit their operating costs by keeping their teams focused.
Jeb Molony is President and Founder of e-vos, a firm which utilizes cloud computing to assist clients, increase productivity and stay on trend, while decreasing the costs associated with traditional IT. Mr. Molony founded e-vos in 2011, bringing his background in finance, law and website design to his role in the company. As President, he oversees the direction and strategy for e-vos operations, including website design and SEO, practice management solutions, marketing, sales, consulting and support. Mr. Molony holds a bachelor’s degree in Financial Management from Clemson University and a J.D. from Charleston School of Law.
The number one way for small businesses to reduce their operating expenses is…
To improve the communication between their internal personnel and departments.
Most businesses try to streamline their systems, but do not clearly understand what they must accomplish in order to do this and often times are led astray because they have misconceptions about how software they have purchased is actually being used. A business can streamline its systems by simply focusing on communication.
Start by drawing the business from the customer’s experience pretending computers do not exist. Define every piece of information and the paper that would have to pass between departments for the system to work. After the entire system is defined using paper, begin applying the technology the company is currently using to each point of communication. If the company cannot identify what is being used for a particular point of communication then that point should be addressed, and a system put in place.
By mapping the communication and putting a process in place for each point a business will not only streamline paper work, but will better define each job position. Once the positions are defined a business will be able to improve the hiring and training processes because it will have a clearly defined job description for each position which will lead to improved job postings which will lead to improved applicants.
Most businesses do not pay attention to the costs associated with hiring the wrong person. The expense of hiring, training and losing a person are enormous especially for a small business. Improving communication throughout a company will help a business reduce overhead expenses by increasing efficiency and reducing employee turnover while improving the customer’s experience.
Marquita Miller is a Published Author, Speaker, and is the Founder and CEO of Five Star Tax and Business Solutions, a full service accounting firm in Kansas City, Missouri. Marquita is also a business strategist, a well-known advocate for entrepreneurship, and a small business expert contributor on local television morning show and national magazine publication. Maquita is a recipient of Woman Who Means Business and Kansas City’s Influential Woman award. Learn more about Marquita and her work at her website, www.marquitamiller.com.
The best way a small business owner can reduce their operating expenses is…
Through forward thinking and planning ahead.
Most accountants will advise you to “reduce expenses” to increase profit. However, planning ahead for taxes and business seasonality is a rare exception. By pre-paying expenses and making strategic large capital expenditures at the end of the tax year, for example, business owners may see a huge benefit that they wouldn’t realize the following year. The increased expense may lower profit (and taxable income) thus reducing tax liability.
Taking a close look each month at Income Statements, Balance Sheets and Cash Flow Statements will help in the forward thinking. This understanding of how and more importantly, when, money is coming in and out of the business allows a business owner to reduce monthly expenses by taking advantage of cash discounts from vendors, payment terms and even avoiding late fees. Business owners will also be able to see if they are on target to hit monthly budgets before making expenditures.
Many business owners are timid about looking at the numbers and avoid it until they are forced to look at them at year-end. That’s a mistake! Using the numbers as a road map to success is a far smarter strategy than using them after the fact to figure out what went wrong.
Randy Collack is the Chief Operating Officer of BlueGrace Logistics, a technology, transportation and logistics company providing logistics technology and transportation management services. Throughout his tenure with the company, he has been responsible for the growth of the sales and operations departments. He brings forth vast industry experience as the former President of PDT Trucking and senior positions with Express One and Preferred Shipping. He studied at Purdue University and also earned his lean Six Sigma Black Belt certificate.
The number one way for small businesses, particularly those who do a significant amount of shipping, to reduce their operating costs is…
Look into outsourcing their freight decisions in the same way as they would any other business function.
Most small businesses use outsourcing companies like ADP to handle their payroll and tax compliance. They use CPA firms for their financial reporting needs. They go outside to private attorneys for their legal needs. They all recognize that Small Businesses generally do not need these resources on staff yet and it pays to have experts at your fingertips. But when it comes to their freight decisions, they try to handle in house.
Freight costs can be 3-5% of a company’s Sales but for some reason many small business owners think it’s just a cost of doing business that they cannot control. The truth is their competition at Medium and Large Businesses spend large sums of money to reduce their freight costs to gain competitive advantage. By outsourcing Freight Decisions to 3rd party Logistics companies, Small Business owners can gain that same advantage without the associated cost of hiring the expertise. Reducing Freight costs from 3-5% to 2% or less is very possible.
Julia Angelen Joy is the Founder of Z Group PR, a freelance consultancy which provides agency-style public relations services to small businesses, non-profits and start-ups, with a focus on building cultures of communication. Julia founded her company after years working with communications teams and public relations agencies. She enjoys being involved professionally in many business groups and is a registered Girl Scout Leader. Now, with 18 years of experience, a second marketing degree, and MBA on the way, Julia can solve client PR issues faster than you can say, “Super PR Lady!”
I have consulted for over 100 small businesses and I see the same two issues over and over again. The first way that small business owners can save money is to…
Every time an owner micromanages a project or process, there are costs involved – their own hourly rate but the lost opportunity costs. I watch over and over as senior leadership delegates a task and then spends hours working on what they had delegated. Not only is the cost of the duplicated efforts a waste, there are costs associated with employee frustration minimizing productivity.
This leads me to the second part of my answer. Business owners want to save money by hiring the least expensive person for the job, but they rarely calculate what the hidden costs are. For example, by hiring a less experience receptionist at $12 per hour, they miss out on all of the work efforts that the $15 per hour receptionist would have been able to manage. And then of course, all of the hours they then have to spend micro-managing the less productive staff member.
Jake Ducey is the youngest published motivational author in Penguin/Random House’s history. He has two books, and his first made the Amazon bestselling list with no budget, and his second is out January 2015. He travels the country to speak and consult for small businesses and fortune 500 companies on how creative marketing and brand differentiating. He is the leading young voice in the business world and has even given a TED Talk. Learn more about Jake and his work at his website, jakeducey.com.
The #1 way small businesses can reduce their operating expenses is…
By using their “why” and “etheos” of the company as their marketing strategy.
Companies ignorantly spend endless money on advertising with no real strategy. People buy and become life long fans because of your “WHY.” If you center your advertising around your companies purpose, utilize social media to reflect that, and write articles for online publications about it, your brand will spike in popularity. And it will cost no money.
Michael Kawula is the Founder of Self Employed King, the #1 Online Community for Local Businesses looking for the training and support to massively grow their businesses.
The number one best way to reduce operating expenses is…
To avoid taking on unnecessary expenses all together.
For businesses starting out, typically unnecessary money is spent on items that aren’t actually even needed for the business.
Businesses should start out as lean as possible and avoid expenses that aren’t absolutely needed for the business to grow.
Cash is truly King!
Vladimir Galant is an IT Consultant and Founder of 911 PC HELP, Inc., an established Silicon Valley IT services company that provides small businesses with technological consulting, tools, and resources needed for success in a diverse and changing world, in addition to building long-lasting relationships with clients and business partners.
One of the services we provide for our clients is IT and phone related expenses. Here’s a brief summary what we usually see when it comes to business operating expenses…
Number one money burner is signed long time ago phone bill. Usually once it’s set owner doesn’t have time to go through it periodically and just keeps paying for old and obsolete services or doesn’t take an advantage of current tech trends. We recommend periodically review Internet and phone bills.
Second one is old equipment (computers, servers, printers) or software. Some owners see it the way if it works, then why change it? However, often they don’t take in consideration downtime when it breaks or slow performance. Trying t save by not spending could end up with higher expense and loosing productivity.
Third one is printing supplies. The cost of genuine brand cartridge is 2 or 3 times more than the same OEM or re-manufactured one.
I could say a few words about email and website hosting expenses optimization and, of course, ability to work remotely. With today’s technology you can run virtual office based on your employee home and save on rent big $$.
And the last one and i think the major one we dealt with is unfortunately THE Big Ignorance. People are so locked in their day-by-day routine so they don’t even want it comes to the point to change anything even if that can save them the money.
Michael Salem is Co-Founder and CEO of Vorex, a leader in professional services automation (PSA) software, which was founded in 2007. His career as a visionary business innovator spans more than 20 years. He has extensive experience in cloud computing, professional services automation (PSA), project management, small business IT solutions, and risk management. Mike has directed the company’s growth, while developing and implementing Vorex’s vision and business strategy. Under Mike’s leadership, Vorex has grown to become a leading provider of cloud-based PSA solutions. The company provides cost-effective, user-friendly software solutions to help small- to mid-size businesses streamline operations, automate time-consuming tasks, and improve the bottom line while focusing on their core business.
In today’s small business world, the common reasons why businesses fail are out-of-control growth, poor accounting and operational inefficiencies. Small businesses are constantly dealing with inefficient back-end processes that result in increased costs – as well as reduced employee productivity and revenue. Because of this, often times small businesses find it difficult to take on new projects as they do not know their financial standing, availability of resources or their pipeline in real-time. Here is a short, yet simple, “1-2 Punch” on how your small business can be better organized starting today:
Punch 1: Automate as many business function as you can, with the least amount of software solutions; preferably one or two solutions at the most. Operating your business manually is costly, time consuming and prone to errors. But randomly picking up different solutions for each of your departments is not the answer either, as you will need to integrate them, learn different systems, and manage multiple licenses. You can get the best of both worlds by implementing a single comprehensive solution.
Punch 2: Know where your time and money is being spent. Not accurately tracking your resource allocation could be the difference between running a profitable business and closing your doors. Regardless of the type of business you run, you should consider tracking your clients, projects, resources, time, and invoicing in a single online solution that will keep you organized with a full 360 degree view of your operation. There are many solutions in the market, such as Vorex, which provides insights into the information needed for critical and strategic decision making that supports both long and short term planning.”
Sherry Holub is the Founder and Creative Director of JVM Design, a high end web design and creative graphic design agency,
and has close to 20 years experience in her industry. Sherry has also been a guest speaker on design and marketing at business organizations, has been a judge for creative awards such as the Davey Awards, and writes a number of the articles you can find on theJVM blog.
I feel the #1 way small businesses can reduce their operating expesnses is…
A tie between having a home office (low overhead) and hiring independent contractors (drastically reduce costs).
While these two things work best for certain service businesses and B2C businesses that can largely operate via the web, they’re certainly worth looking into for the potential savings.
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