How to Decrease Expenses in a Business

Decreasing operating costs for a business can seem like a daunting task, but like with all things is quite easily done when broken down into smaller more manageable chunks. The most important aspect of decreasing business operating costs, however, is understanding the fine line between impacting your team’s ability to operate and reducing unneeded expenses. Keep in mind that if you begin to hinder your employees, then you may end up in a downward spiral. At the same time, the types of cost-cutting you can do will differ depending on several factors from cash flow, to how long you can operate in the red, the overall market outlook, and the reason why you’re cutting costs in the first place. With that all said, not every method is the right method for every situation, so be sure to think carefully if that method is right for your business.

Minimize Clutter

This technique is a two-pronged approach. The first is minimizing physical clutter like trash, piled-up equipment, old or unused supplies, and more. It’s very important to make sure the space inside your business is utilized to the best of its ability. For instance, reducing clutter in some spaces may open up potentially new operating spaces that open up revenue streams down the line. At the same time, a cluttered space is going to slow down and hinder employees and potentially negatively affect morale. Therefore, it’s important to move your extra stuff or even junk using rental mobile moving storage units or professional junk haulers.

The second prong of this approach deals with people and resources. Redundancy is only ever good if it’s critical infrastructure like servers or essential personnel that may be highly skilled. However, if you have five people all doing the work of one or two people then you have unnecessary redundancy. This lapse in management results in overpaying for what could be done by fewer people. It also results in an environment where those redundant employees may become stagnant since they don’t have to work as often. Depending on your business a stagnant employee could lose their skills or even become obsolete should they stagnate too long. At the same time, that employee may be useful for other roles where more revenue can be generated, or at least where other processes can flow more smoothly. So, if you’re asking yourself how to decrease business expenses, start with an inventory and inspection of the physical office space as well as an inventory of employees and what they all do. By removing redundancy and clutter you’re going to start saving money right away and further streamline processes to work more quickly and effectively.

Maintain a Safe and Clean Environment

This goes hand in hand with the above-mentioned step. Not only should you seek to remove waste and redundancy, but you should also seek to maximize workflow and productivity in the workplace. An unsafe or unclean environment can easily result in employee injuries which further hurt business finances, or it could mean downtime for the crew and lost revenue. Therefore, it’s important to maintain all working stations in the cleanest possible manner. This can even be done on a team-by-team basis and therefore elements the need to hire a cleaning crew further saving money. You may also want to take this time to invest in the environment of your workplace. Believe it or not, a lively well-designed workplace can boost employee morale which can then boost employee productivity. Depending on your business putting in concrete pavers, getting amenities like porta potty rentals, or keeping infrastructure clear by contacting bulk road salt suppliers can help immensely.

Outsource Unrelated Work

On the topic of streamlining success with employees, it may be more beneficial to hire out certain services rather than keep an in-house employee for that role. This is often the case with periodic services requiring specific skill sets that your business may not relate to. For example, if you run a B2B business selling software to other businesses it may not make much sense to keep a full-time law care team on staff. Not only would you be paying staff for time and retainers when not using their services, but you’d also foot the bill for equipment maintenance, repair, and storage as well. Instead, consider hiring out unrelated services like bookkeeping and financial management services. Instead of paying an in-house bookkeeper just to do payroll twice a month, you could pay far less by having an agency or independent agent do it instead.


Renovate with Assistance


The same line of thinking also goes for other tasks and projects your business may have in the pipeline. Why buy or do projects yourself when you could potentially save money by hiring professionals to do them? The simple answer comes down to experience. Let’s say you’re running a cupcake business and are renovating part of the store. Odds are you don’t have experience in renovations and the time it would take you to do one task could be done in less than half the time by someone who is skilled in that task. While you may be paying labor costs for a contractor to do something, that gives you and other employees time to focus on bringing in revenue for the business rather than work and income coming to a halt. Furthermore, not all work is created equal. One mistake could mean Miswiring something or not completing the task at hand properly. Although it may not be an issue in the short term if something is installed incorrectly it would mean downtime and calling a contractor later on anyway to fix it down the road. Worse yet, something like a water pipe leaking or wires not being installed correctly could result in damages to your business that shut you down for good.

At the same time, it may be best to hire out certain equipment as well as labor depending on the task. For example, if you are clearing out a space and have lots of waste material then it may be best to find dumpster rental services in your area. The same goes for any specialized machinery, it may be best to look for heavy equipment rentals or local dumpster rental services.

Look For New Vendors


Another critical aspect of reducing costs comes from your cost to obtain necessary goods and services to get the job done. Although your business may be comfortable buying supplies from vendors you’ve worked with in the past, you should never become loyal to a vendor. Instead, periodically look around for new vendors which may offer better prices, new customer discounts, or other incentives. In some cases you may even switch to a new vendor and the old vendor may reach out and lower pricing to keep an old customer rather than lose business. So, be sure to periodically stay on the lookout for new vendors with lower pricing.

Eliminate Discretionary Spending


At this point in the game, it may be time to start thinking about minimizing growth while maintaining revenue streams. This is where it can become a fine line between helping or hurting your business by reducing business costs. Overall some safe discretionary spending may be in the form of traditional budget cuts. For instance, does your business actually need a new coat of paint, or is that more of a luxury? Of course, that will depend on your business and circumstances, but it’s a good place to start. Another place to cut spending would be in travel costs and parties. It’s nice to sit with potential customers and vendors face-to-face, however in today’s day in age most companies are happy to do conference calls and zoom meetings in place of flying out to see them. This will not only save time but also a lot of money in travel expenses.

Another avenue is in parties, luxury spending, and more. You may want to consider scaling down company parties and reducing luxury spending by buying cheaper materials wherever possible. However, be careful to not use this option to go nuclear. In some cases abruptly canceling a company party or function may not only hurt employee morale but may also send a signal to the employees that the company is struggling. This may send employees on a job hunt and you could face losing people even if the company was able to stay afloat but just wanted to cut costs.

Your Lease

Another large factor in business operating expenses is your lease and the land you use. It may be time to approach the landlord or owner of the building and attempt to renegotiate a new lease agreement. In some cases negotiating into a longer-lasting lease may even save you money. For instance, if your lease needs to be renewed annually, then a longer-term lease of say 5-10 years may offer a lower monthly lease payment since you’re locked in for longer. Landlords will typically appreciate more stability and certainty over time as well. However, if negotiations don’t work in your favor, then be ready to move or find a new place of operations to save on costs. You may also consider having the landlord take over some services like hiring a full service lawn care business rather than you foot the bill.


On the topic of real estate, it may be worth exploring a sublet for the property you are in. Along with your inventory of materials and employees, you should also have a good understanding of how your business is using the space. If you have unused offices or space that has been sitting empty for some time, then perhaps a sublet is a good idea. Be sure to check with your landlord first however to ensure that subletting is allowed. Also, be sure to vet your subletters and ensure they can pay their bills on time and will not interfere with your business.

Cut Pay, Perks, and Benefits

Perhaps the most difficult step of them all is right before layoffs. These methods should only be reserved as nuclear options. At the same time, if you do pursue any of these options you should prepare for any fallback or a drop in employee morale. The best place to start is actually with the highest-paid employees. These are often your CEOs, CTOs, CFO, etc. Although painful it may be necessary to reduce the highest salaries since those individuals can likely wether a reduced salary for quite some time. However, you must be careful in that a reduction in slower may also be followed by someone quitting and joining the competition. Be sure to not reduce pay too far below your competitors and if at all possible cut unused perks and benefits. Again, you must be careful with cutting perks and benefits. For instance, by cutting critical benefits like medical insurance you certainly will face backlash and a wave of employees quitting. Yet, there may be some perks and benefits that go largely unused and could be eliminated without too much pushback. Either way, be sure to dip your toes in the water first before fully diving in to avoid a downward spiral.

Cutting Costs

Overall, there are many ways in which a business can cut costs in today’s day in age. The methods and techniques will vary according to each individual business depending on the industry, employee size, and more. From reducing redundancy in positions to clearing clutter from spaces to negotiating a new lease, there are numerous opportunities to reduce unnecessary spending and maximize realized profit. Just to be sure tread carefully when and if it comes time to begin cutting benefits and perks the employees enjoy and be aware of how your cost-cutting measures are perceived by your employees and the competition. If you cut too aggressively you could send a message of weakness or even lose employees to the competition. However, if you cut costs skillfully, your employees, customers, and competitors may not even notice.






Leave a Reply

Leave a Reply

Copyright All Rights Reserved - Tips to Save Money