The first few years of operation for any business are largely considered to be the most vital, with the financial management habits and processes you develop being foundational for future growth. But in Australia’s current economic landscape, many small businesses are currently facing increasing costs as a result of heavy inflation rates over the past year. Given the current high costs of goods and services, it’s necessary to turn to tried-and-tested methods to cut expenses and remain solvent.
Learning how to be strategic with company expenditures can help ensure your business is poised to strengthen its profits without having to cut corners elsewhere (i.e. when it comes to product quality). Finding an effective middle ground relies on knowing where efficient tools can be used, and where you can afford to divest and analyse your hidden costs.
Below, we explore seven effective strategies to cut costs without cutting corners for your own small business or family-owned and operated enterprise.
Invest in suitable liability coverage
Let’s start with a foundational investment that all small businesses will need to safeguard their operations and reputation: liability cover. A major potential hidden cost that isn’t easy to initially recognise is the cost of being prosecuted and fined. When you’re just starting out, these costs can be the end of your business.
While no one plans for misconduct, it’s hard to always remain conscious of your compliance, especially if you have new, young staff. Protect yourself in the case of misconduct from these hefty fines through cheap liability coverage. Insurance will also provide added peace of mind to focus on your core competencies.
Promote yourself locally
Society is trending towards more local and conscious consumer purchasing. As a new local business, people will want to know about you and buy from you, as long as they can find you. Consider promoting yourself on local business directories, Facebook groups and letterbox drop-offs to help get your name out there to a valuable target audience. This is a highly cost-effective (usually free!) way to market your business, often with a strong conversion rate.
Use tech to make your job easier
As a small company, you might want to steer away from setting up any new tech when you have a strict budget. However, investing in some online tools could save you both time and money, as the right business technology could do some of your work for you.
These are two no-brainer investments when it comes to securing business technology for your enterprise:
Cloud platforms allow your team to work from anywhere
As a small business, you might be utilising the skills within your inner circle or family. This is a great approach to keeping things lean, but your team needs a shared database to access and share information.
Cloud services enable you to store and access data online instead of on hardware. They provide easier storage and accessibility. This means that if you have team members working in their homes, they can access data from anywhere. Services like Google Workspace and Azure AI are great platforms for this while also connecting you to collaboration tools as well as scalable storage space.
Hand over the customer queries to a robot
Artificial intelligence (AI) is no longer just reserved for large corporations. In fact, more small businesses are beginning to make use of artificial intelligence to make operations more streamlined. Making investments such as an AI chatbot to handle common customer inquiries saves time so you can focus on what matters most — your core activities.
Reassess your main costs
Business costs can be difficult to keep track of, but they can quickly add up. This is why it’s recommended that business owners track their expenses to identify ways in which they could save money or cut spending.
Are you forking out too much on bulk products that aren’t selling? Could you afford to downgrade offices? Do a thorough check of all supplier invoices to make sure there are no overcharges, double billings or discounts that haven’t been applied properly. Look into costs like equipment, wages and rent, and see if you can find cheaper alternatives that will work for you.
A business lease is a key cost factor affecting cash flow. Often, landlords want to support mums in business, so you could try to negotiate payment terms with your landlord to get this cost down. And if you get to spend time with the family over Christmas away from the business, you can also consider shutting everything off in your store and office during close and shutdown periods to reduce the amount you spend on utilities.
Cut the fat wherever you can
Cutting the business fast refers to how effectively your business utilises its capital, labour, products, services and materials to generate revenue. Productivity measures how effectively you are using resources, while waste production measures the amount produced over time versus dollars saved. There is always room to improve upon your efficiency levels through minor and major tweaks.
If you’ve got part-time workers, and they’re people you already know and trust, this works great as a way to optimise resources and wages. However, you can assess if there is any downtime in your staff’s day, and find tasks that they can do to help your operations while optimising their working hours.
You can also do a thorough analysis of your budget and balance sheet, production costs and goals and processes currently in use carefully to see if productivity can be increased in your team or elsewhere. You can also make sure you claim all of your tax-deductible expenses. As you understand where and how you spend, it will become much easier to control costs.
Don’t be afraid to outsource
Small business owners wear many hats. But doing too much yourself may be reducing your productivity and efficiency. By outsourcing non-core functions you can tap into the knowledge of experts from an array of backgrounds while saving yourself from full-time employee costs.
Some examples of tasks commonly outsourced are:
HR and recruiting
Some small businesses find it challenging to manage more specialised aspects of HR such as employment relations issues. Subcontracting HR can help small business owners save money when there isn’t enough HR work to hire a full-time team member, which is particularly relevant for a new business.
IT and cybersecurity services
Third-party cybersecurity and IT experts can resolve technical issues, keep data secure and maintain system performance at a fraction of the cost of hiring full-time staff. Outsourcing your IT means you don’t need to onboard and pay for a full-time staff member, but you’ll still have access to support when you need it.
Check your subscription services
Subscription costs can add up quickly. For new businesses, there are fantastic tools that can streamline your operations and reduce the workload in your teams’ hands. But, these can often go unused and you may be paying for unnecessary subscriptions.
When reviewing subscriptions, include all services that require regular payments – from online tools and software subscriptions to membership dues. You can also audit services that overlap to identify which is the best for you or consolidate subscriptions that share similar features to avoid overspending on similar services. Finally, cancel subscriptions that you’re not seeing value from or using regularly.
Cost cutting as a strategic business measure
Every small step towards efficiency can add up in savings, from using technologies that take the load out of your hands and cutting office and subscription costs. Cost cutting should be treated as a strategic business decision that aligns with company goals and values. When done with care and thoughtfulness, cutting costs can help you overcome the notoriously hard early stages of a business. Be creative and efficient as you make these changes – you’ll soon see their impact on your bottom line!
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