Determining the best way to maximize profits can be a daunting task for any small business owner. Depending on your company’s needs, you may need to decide if increasing profits or decreasing expenses is a more viable option.
Keep in mind that reducing office expenses is usually the easier route to take and yields the quickest results. To gain an understanding of which expenses are the most essential, conduct an audit of your business’s cash flow. Then, compare it to your goals for the future to decide which expenses are worth the money.
Below you will find four methods to reduce expenses related to common business practices, and they can likely be applied to your organization. If you find that not all the minutiae apply, feel free to adapt the strategies to make them work for you. No two businesses are alike, and as the decision-maker, you hold the power to decide which strategies are the best.
Eliminate Unnecessary Subscriptions
Recurring charges, such as those for software applications or consultation services, are easy to overlook and can add up to significant expenses over time. Once every quarter, make it a point to look over these costs and make sure they are still relevant to your business. Though this is a time-consuming process, reducing costs is an obstacle that every entrepreneur must overcome, and doing so will eventually lead to lasting benefits for your company.
When looking over your expenses, you may find that certain software is no longer being used regularly and does not justify the price tag. Or perhaps you will discover that some subscription-based services are being used, but not every month. In this case, it makes more fiscal sense to pay for the service on an as-needed basis. In other words, instead of committing to the annual plan, only subscribe during the months you will be using the service.
The marketing for these subscriptions is devised to make you think that the yearly plan is the cheapest, but if you are not using the service regularly, it is not worth it. This practice of frequently looking over expenses will help you develop healthy spending habits for your business. In the same way that you need regular checkups with your doctor, you must conduct checks with your business to make sure everything is operating at its most efficient capacity.
As your business grows, you may find that conducting some services in-house is no longer financially justifiable. In this case, consider hiring the help of outside professionals to take care of these resource-consuming processes. Though it may seem counterintuitive to hire help when considering the reduction of expenses, in the big picture, using the most efficient method to complete a task saves significant capital.
Outsourcing business forms printing and mailing, for example, is a great way to reduce expenses and streamline the process. Many printing companies also provide services that you may not have known about and can benefit from, such as binding, shrink-wrapping, or encoding. Hence, you may be able to establish an agreement with outsourcers to give you a deal when you purchase multiple services. Moreover, your business will benefit from creating business-to-business (B2B) relationships and establishing itself as a notable and reliable entity in the industry.
A key aspect of owning a business is knowing how to best allocate your money to increase profits — this can mean spending money to make money. Unlike losing capital by paying for unnecessary subscriptions, paying for a service that will improve business performance, efficiency, and quality will lead to lasting benefits, such as customer satisfaction, brand reliability, and business expansion.
Cut Supply and Equipment Costs
Making smarter decisions when purchasing supplies and equipment is a great way to reduce expenses in the office. For everyday supplies, such as pens and paper, be sure to buy in bulk and buy generic. Generic products work just as well as brand names and can significantly reduce costs.
In terms of equipment, make sure you are using products that are high quality and multifunctioning. A cheap, low-quality printer, for example, that requires constant repairs is going to cost you more in the long run than a more expensive, high-quality printer that barely needs maintenance. Moreover, if you have equipment that performs multiple functions, such as a printer that can scan, copy, and fax, you are stretching your dollar and getting more functionality for the same cost.
Using AI tools is another way to cut equipment costs, as well as labor and time capital costs. Instead of hiring an employee to perform a function, you can pay for artificial intelligence to get the job done for much cheaper. For example, ChatGPT can serve as a virtual assistant, content generator, and data analyzer all in one. With the increase in the implementation of AI, you will find that there is a tool out there to help with every aspect of your business. In general, take the time to decide which expenses will contribute to your business’s functionality and which ones are unnecessary and need to be cut.
Work from a Home Office
Ditching the office in favor of remote work is another great way to save as a small business owner. The list of reduced expenses is long, with rent, utilities, and equipment being the most notable. You may also be able to receive a tax break by writing off costs related to maintaining your home office as business expenses.
After the COVID-19 pandemic, we’ve seen a major shift in work structure, as companies around the world realized that their employees did not need a physical office to get their work done effectively. In fact, according to a February 2022 survey conducted by the Pew Research Center, 60% of U.S. workers who are offered the option to work remotely choose to do so. Employees enjoy the increased flexibility, comfort of being home, and lack of commute. Additionally, there are fewer absences and less employee turnover, as favorable work conditions encourage people to stay with their company.
All this information is important for business owners to understand because happy workers lead to more efficient operations and, ultimately, higher profits. Moreover, if the need to hire someone new does arise, businesses have a much larger pool of candidates to choose from, increasing the likelihood of finding the elusive perfect fit. Companies can widen their horizons and conduct business internationally from the comfort of their own home when working remotely.
Reducing office expenses may seem like a daunting task at first, but after you conduct a thorough analysis of your business’s needs and goals, you will find that the solutions are quite simple. One of the primary advantages of being a small business owner is having control of every aspect of the operation. This means you can experiment with cutting costs in a certain department and increasing the budget for another to see what will maximize the functionality of your business.
Doing so will help you better understand how your business functions and what it needs (or in this case, does not need) to thrive. The above four methods of cutting recurring costs like subscriptions, outsourcing complicated responsibilities, reducing supply and equipment costs, and working remotely, are a great way to start reducing common office expenses. After you have gained an understanding of how to optimize your business’s budget, you can take further action to reduce expenses and maximize profits in the long run.