From conducting quarterly subscription audits to finding significant savings with remote work, twenty-three CEOs and founders share their top strategies for cutting costs in small businesses. This compilation of insights offers a diverse range of tactics employed by seasoned professionals to keep their company expenses lean. Discover their innovative approaches to financial efficiency in our latest feature.
Conduct Quarterly Subscription Audits
One effective method I’ve adopted to minimize expenses in my blogging business is conducting a quarterly review of all our tool subscriptions.
Every three months, I audit our active subscriptions to assess their necessity and cost-effectiveness. This regular check helps identify any redundancies or underutilized services.
Since these costs can add up pretty quickly, finding opportunities to cut back or switch to more affordable alternatives really helps to maintain our budget’s health.
Since I implemented the quarterly review, we’ve cut our expenses by over 5% per year.
Combine Lean Marketing and an SEO Focus
One way I’ve been able to minimize expenses in our small business is by placing a large amount of effort on keeping the business lean, especially through marketing. To keep it lean, we’ve focused a lot of our efforts on building out our SEO so that we can acquire the cheapest leads and have the most motivated clients reach out to us, rather than chasing them down through outbound marketing.
Additionally, we’ve used other forms of free or inexpensive marketing to create inbound leads, such as Craigslist ads, referrals, and Facebook group posts. Furthermore, we’ve been able to minimize expenses by keeping the SEO process of link-building in-house, as that is what typically makes SEO the most expensive for other companies.
Lastly, we’ve adopted a virtual model of buying houses so that we’re able to eliminate the costs of gas, travel, and the need to have multiple employees to accommodate our clients. Through this, we have been able to buy more houses and reduce expenses.
Gain Cost Savings with Paperless Transition
Going paperless can be an effective way for small businesses to reduce costs quickly. Though the initial implementation may require extra work in terms of scanning documents and switching over to secure digital workflows, once taken on, you will realize significant savings over time on everything from paper and printer ink purchases to postage costs and rental fees for bulky file storage units.
Digital solutions make perfect sense in today’s fast-paced digital environment. Customers prefer email receipts over paper invoices for customer convenience. Transitioning away from paper communication, billing, and record storage towards cloud-based systems over time will save both dollars and trees alike!
Going paperless requires an initial investment in learning new tools and workflows. However, the long-term payoff, such as reduced operating costs and productivity gains, more than makes up for any initial humps during onboarding.
Embrace Cloud Solutions for Efficiency
One way we’ve been going about this is by embracing cloud solutions. I’d say it has reduced our business expenses significantly.
It eliminates the need for on-site servers and hardware, cutting both direct and indirect costs. Cloud tools offer scalability, allowing us to pay only for what we use, which suits our dynamic business needs. Moreover, remote access enhances operational efficiency and reduces the need for extensive office space.
Provide Strategic Recurring Expense Management
I keep a running list of all recurring expenses that my business has each month, and when I want to add an expense, I review the recurring ones and find something that I can cancel to make room for this new expense. If the new product or service I want to buy is not a better replacement for any existing expense, I don’t purchase it. That allows me to keep my expenses fairly flat.
Leverage Freelancers to Cut Costs
I’ve been able to cut down on my business expenses by hiring freelancers. Hiring full-time employees costs a lot of time and money, but the gig economy can help you here. If you’ve only got a few projects each month, consider hiring freelancers for some of the work. From graphic designers to web developers, the gig economy has it all, and they’re much cheaper than building your own in-house team.
Maximize Tax Reliefs for R&D
Exploring various tax reliefs to minimize expenses is crucial for small businesses, especially those engaged in research and development like ours.
By claiming the costs of our projects as tax relief, we benefit significantly. We might also qualify for small-business rate relief on our property. Deductions for a variety of expenses, such as office supplies, vehicle fuel, and marketing costs, are available to us.
In our automation research and development business, these tax reliefs are particularly beneficial, allowing us to allocate more funds toward innovation and product development, which are essential for our growth. The ability to deduct a wide range of operational expenses helps us maintain a healthier cash flow.
Furthermore, these tax benefits encourage us to invest more in research activities, knowing that a portion of these costs can be offset, ultimately aiding in reducing our overall business expenses.
Use a Free Tools Strategy
As a small business, keeping overhead low has been critical. For us, that meant forgoing fancy office space and optimizing our use of free online tools. Our team works remotely to save on rent, and we collaborate using open-source platforms like Telegram and Trello. This allows us to invest more into developing our actual product.
Bootstrapping in these ways has stretched our runway much further, buying us time to turn an MVP into a growing company. We may operate differently than legacy businesses, but our digital, distributed model lets a scrappy startup like us punch above our weight class on a tight budget.
Automate Marketing to Reduce Expenses
Automating our marketing efforts has minimized expenses. Initially, we had multiple contract workers to handle our email marketing campaigns. The hours worked and email-finder tools made costs too high to justify the results.
We then looked at email marketing AI tools like Mailchimp and general AI platforms like Regie. We found that we could use these platforms, which have an affordable monthly fee and can scale with our business.
The contract workers now work fewer hours and can take on other projects. We don’t need different tools; the platforms have all those features.
I learned that it’s better to have a centralized platform to save on expenses. You can use that subscription fee as the value of the platform. If it brings in more business, you can just choose a higher tier. It works.
Engage Suppliers in Cost Negotiations
I believe that one of the most important strategies for lowering costs is to negotiate advantageous terms with suppliers.
Small firms can enhance their purchasing power, look for savings on bulk purchases, and investigate alternative suppliers to obtain better bargains. This can result in cost savings on raw materials, components, and services, which can contribute to higher profit margins. Building strong, collaborative relationships with suppliers can result in these financial benefits.
Utilize Big Picture Financial Decision Making
As a small business owner, I’ve been able to minimize expenses by focusing on the big picture. I know that it’s tempting to get caught up in the day-to-day details of running your business—like whether you should buy new computers or hire another employee—but those kinds of decisions can really throw you off track if you’re not careful.
The key is to take a step back and think about what’s most important for your business right now. Do you need more employees? More inventory? Or do you just need more time and energy? Once you know what’s needed, it becomes much easier to decide how much money you can afford to spend each month and where it should go.
Barter to Preserve Cash Flow
Consider bartering goods, services, and expertise with other businesses or people (influencers, experts, etc.) to preserve financial resources while acquiring what you need for your business.
As money stays in your bank account, bartering enhances operational and financial resilience, especially during economic uncertainties or challenging market conditions. By bartering, companies may address current operational issues while reducing the risk of over-committing to costs. Remember, we can spend the money saved on other necessary goods where barter is impossible.
Beyond mere transactions, bartering fosters networking and partnerships within the local (or even global) business communities, potentially leading to additional opportunities, collaborations, and referrals.
This age-old practice serves as a multidimensional means of exchange, operating across various industries and on many levels, showcasing its versatility as an alternative economic tool.
Discover Efficient Inventory Management Systems
Keeping a close eye on inventory levels to avoid overstocking or stockouts has helped to minimize some of our small business expenses. Implementing inventory management systems to track usage and reorder supplies when necessary is beneficial. This approach prevents holding onto products we don’t use or sell, ensuring a healthy flow of products in and out of the shop.
Efficient inventory management leads to smoother operations within our business, as we can fulfill customer orders promptly and always ensure we have what’s in demand. In the beauty industry, it’s important to keep on top of trends, which often means ending up with excess inventory.
By monitoring closely, there is a much better chance of ordering what clients want, leading to increased profits instead of losses.
Hire Talent Over Experience
Prioritizing talent over experience in your recruitment process allows us to find candidates who can learn and adapt to virtually any situation. This ability to adapt is crucial for small businesses where employees manage more than one role and take on additional responsibilities.
Besides, talented but inexperienced candidates often have lower salary expectations and may require less training than their experienced counterparts. This is beneficial for small businesses, which often operate on a limited budget. If you hire right and invest in your employees, they will be eager to learn and will likely remain with your company for many years.
Outsource to Experts in All Fields
We’ve saved a lot on marketing by outsourcing to an agency. Hiring a CMO would cost much more and provide the same results. Every small business has the option to outsource to experts in all fields and should do this until they grow enough to have full-time employees take over these roles in-house.
In addition, we’ve saved by being a fully remote company. There’s no overhead for office space, and our employees are even more productive from home. Removing the stress of commutes and leaving work to fulfill other obligations has lifted a weight off everyone.
Explore Tech-Driven HR Cost Reductions
For us, HR was something of a luxury we couldn’t afford in the early days. So, we leveraged technology and online platforms for recruitment, training, and employee management, which significantly reduced our operational costs.
For example, instead of hiring a full-time recruiter, we used online job boards and LinkedIn to find potential candidates. Additionally, we adopted e-learning platforms for staff training and development, which not only cut costs but also allowed our team to learn at their own pace. These small changes had a big impact on our cost-cutting objectives.
Uncover the Cost-Efficient Dropshipping Model
By embracing a dropshipping model, we’ve eliminated the need for a physical warehouse to store inventory. When I ventured into e-commerce in early 2017, I quickly realized the potential of this model, especially for a niche like high-ticket items such as e-bikes.
Dropshipping allowed me to eliminate the need for stocking up on inventory and managing a warehouse. This not only saved me a significant amount of money upfront but also spared me the ongoing costs associated with storage and logistics.
By partnering with reliable suppliers who handle the shipping process, I’ve been able to focus on growing the business without worrying about inventory management.
Implement a BYOD Policy
Implementing a Bring Your Own Device (BYOD) policy is similar to how numerous companies subsidize their employees’ service plans instead of issuing company phones. Allowances are provided to employees for using their personal computing devices, which cuts down on capital expenditures and lets them use their preferred device models. To ensure the security of business information and facilitate IT management, virtual desktops are used to create a uniform working environment.
The BYOD strategy is effective in reducing business expenses because it eliminates the need for the company to invest in hardware for every employee. By having employees use their own devices, there is a significant saving on the initial purchase and ongoing maintenance costs of company-provided equipment.
Additionally, this approach reduces the need for extensive IT support for multiple types of devices, as employees are generally more adept at managing and troubleshooting their own devices, leading to lower IT operational costs.
Maintain Sustainable Procurement Practices
For my clothing company, implementing sustainable procurement practices has been a crucial expense-reduction strategy.
By placing an emphasis on ethical and environmentally sustainable suppliers, our organization has not only mitigated expenses linked to surplus waste and product returns but also attracted favorable feedback from environmentally aware clientele. Excess inventory expenses have been reduced by implementing strategies such as on-demand manufacturing and streamlining the supply chain.
Additionally, the adoption of digital platforms for sales and marketing has substantially decreased the costs associated with traditional advertising. By adopting sustainable practices, we not only demonstrate a commitment to our core values but also achieve a strategic reduction in expenses, which is well-received by both our financial department and our environmentally aware clientele.
Take a Lean Approach
One effective way we’ve minimized expenses in our small business at Spectup was by adopting a lean approach to software and tool subscriptions. Instead of immediately investing in premium versions of various software tools, we started with free or basic versions and only upgraded when the need was clearly justified by our business requirements.
For instance, we initially used free versions of project management and customer relationship management (CRM) tools. As our business grew and our needs became more complex, we carefully evaluated which features were absolutely necessary and only then opted for paid subscriptions. This approach not only saved costs in the early stages but also ensured that we were only paying for features we genuinely needed and used.
This strategy requires a balance between cost-saving and operational efficiency. Regularly reviewing the tools and services you subscribe to, and assessing their utility and ROI, can prevent unnecessary expenses and keep your business lean and agile. It’s a practical approach for small businesses where resource optimization is key to financial management.
Prioritize Zero-Based Budgeting
We have implemented a unique approach to managing our expenses called Zero-Based Budgeting (ZBB). Unlike traditional budgeting methods, ZBB requires us to justify every expense we make. This meticulous process ensures that we are utilizing our resources in the most effective and efficient manner possible. By carefully examining each financial decision, we are able to identify and eliminate any unnecessary spending, ultimately leading to a more responsible use of our money.
Besides controlling costs, Zero-Based Budgeting also fosters a culture of financial responsibility. This method encourages us to be mindful of our finances and promotes a leaner and more flexible operation, which is particularly advantageous for small businesses. By instilling a sense of accountability, ZBB empowers us to make informed decisions and prioritize our expenditures based on their value and impact.
Invest in Energy Efficiency
One successful method I’ve employed to reduce expenses in my small business is adopting energy-efficient practices. We’ve invested in LED lighting, programmable thermostats, and energy-efficient equipment to lower utility bills.
Additionally, we encourage employees to power down devices and equipment when not in use. These measures have not only reduced our environmental footprint but also significantly cut our monthly energy expenses, contributing to overall cost savings and sustainability.
Gil Clark Jr., CEO, GH Clark
Find Significant Savings with Remote Work
In the recent past, one effective strategy I’ve implemented to minimize expenses is embracing remote work.
Before the pandemic, we rented an office space, which added a significant cost to our monthly expenses. When the pandemic hit, like many businesses, we were forced to adapt to remote work. Surprisingly, not only did this reduce our overhead costs significantly, but it also boosted productivity and employee satisfaction.
By eliminating the need for a physical office, we saved on rent, utilities, office supplies, and commuting allowances. Additionally, it provided our team with flexible work hours, promoting a better work-life balance, which resulted in increased motivation and efficiency.
My advice to other small businesses looking to cut down on expenses would be to consider flexible work arrangements. It might not suit every business model, but if possible, it’s a change that can bring about substantial financial savings and unexpected benefits.