6 Cost-Cutting Measures to Boost Growth

Most entrepreneurs looking to increase profits tend to focus on increasing sales and in turn their output. They, at times, tend to lose sight of one of the major aspects of the business that is, its cost.

Small businesses usually face a big cash crunch and a tight squeeze during their initial stages so they have to rely on external sources due to high costs. The costs incurred include an increase in your rental charge or your yearly insurance premium going up.

These cost-cutting measures can help you uncover your weaknesses by bringing you back in the number game.

It is important to keep track of these costs. According to a study conducted by Bloomberg, 8 out of 10 business failed within 18 months because they could not keep a tight check on their costs.

Businesses need to make sure that any activity that leads to the production of good or services is its main business function; the rest are all costs. Having this philosophy in mind leaves an average business with a lot of space to trim down its costs.

Obviously, you don’t want to go overboard while trying to cut down costs, but, in order to improve business efficiency, it is important to reduce all these impairing costs that underling on your valuable resources. Even the smallest decrease in your expenses can have a huge impact on your profits.

Cost-Cutting Techniques for Businesses

Below, we have curated a few cost-cutting measures that would add value to your company or to your profits rather than just doing penny-pinching.

1. Cutting Down Your Production Costs

Production costs have a direct impact on the quality of your output and sale. If these costs are not properly handled, they can be the white elephant for your business and can turn your business upside down.

With a limited budget and a small team, how would you be able to limit these production costs? The key here is to be proactive. You have to look for ways to pinch these production costs down; not only would you be able to keep more cash in hand, but you can also cut down huge annual expenses.

For instance, if you’re running short on cash to buy materials for the production, you can look for alternative sources for a loan, rather than bank loans. Short-term loans through Finance27 – Same Day Loans are an easy option to undergo your day-to-day finances. With easier terms and conditions, you can smoothly run small-scale finances.

A lower production cost means that you will be able to market a better product at a lower price, which not only improves your financial security but gives you a competitive edge as well. As a business owner, you have to find ways to reduce these costs. This can be done through ways like selling down the scraps or leftover materials or you can consider options to transform your waste into another product which can be of substantial value.

  • Outsourcing

If the cost of in-house production is relatively high and eliminates the competitive advantage a business has, then entrepreneurs can look towards outsourcing the product. Not only would the business be able to drastically cut down its costs, but it can also focus on areas where it can take advantage of specialization.

This is a strategic decision which can have a huge impact on the business. A lot of businesses today are now focusing on outsourcing in order to cut down their direct costs. No matter what business you operate, you can’t be a one-stop shop.

  • Experimenting

Another area for entrepreneurs to focus on is, experimenting with the unexpected. Not only would you have to broaden your horizon and have to think outside the box, but also look past the conventional methods.

It is easier said than done, as most companies work on reinventing the wheel of technology rather than introducing innovative, cost-effective measures in the business operations.

  • Optimizing the Production

You have to set a performance parameter to establish the operational efficiency of a business. You have to make the best use of the resources that are available and look for opportunities where you can cut down the costs.

Areas such as unused spaces can be leased out and overflowing storage spaces can be sorted. The extra equipment or furniture can either be sold or recycled when trying to optimize the modern office space.

2. Lowering Down Staff Costs

If you are operating a small-scale business, it is better to think through before recruiting extra employees.  These costs can be tentative at times and when you are going through a rough patch, they can be extensively hard to bear. ­

If you are starting a business, it is always advisable to keep your costs as low as possible. Build up a team of skilled personnel but investing in the recruitment process is not an ideal approach. Try to balance your finances before you incur hiring costs.

3. Cutting Down Marketing Costs

According to research, an average small-scale business spends about 5% of its revenue on advertising and marketing expenses. These costs tend to rise if the business is in the service sector.

Marketing and advertising have a direct relation with sales so you wouldn’t want to completely eliminate these expenses. Instead, you can look for cost-effective solutions to cut it down.

Even though traditional marketing such as TV Advertising and promotions are more dynamic, they tend to be costly and are definitely out of reach for small scale businesses. It is better to rely on social media advertisement, which is apparently a better and cost-effective method.

Needless to say, as more people are using the Internet, the number of potential customers is greater than ever. So, it is a good idea to create an online presence on social media platforms such as Facebook, Instagram or Twitter.

Not only can these platforms have a direct reach towards your customers, but also you will be able to have direct interaction with them. This can help in easily understanding their needs and wants. Plus, the cost of advertising on such portals is quite low. Cold calling, emails, and referrals are other inexpensive methods to increase your marketing profile.

4. Lowering Down Insurance Costs

For startup and other small scale-scale businesses, insurance costs can be a major hit to the finances. Lack of insurance coverage can have dire consequences, so it is advisable to bring it down to what you can afford.

You should discuss this with your insurance broker and ask if there are any discounts or possible ways as to how you can bring down the insurance cost without reducing the coverage. Installing sprinklers, fire alarms, and security patrol can help reduce insurance cost.

Lower the risk the insurer has to bear for ensuring your assets, the lesser the insurance premium you will have to pay.

5. Cutting Down Transportation Costs

Buying a new heavy vehicle for your business can definitely be a pocket buster, but if you are willing to compromise a little, you can get a lot of good deals online. Running and maintenance cost of the delivery vehicles can definitely be astronomical and it can be difficult to bear for a small-scale business.

6. Negotiate With Your Suppliers

One way to do this is by paying up your suppliers on time and being in their good books. Most suppliers are amenable to the idea of allowing discounts rather than losing out a regular customer. For leverage, try to find out other suppliers that are offering the product at lower prices, so your current supplier matches them or beats it

Conclusion

Every business operates in a different capacity and no two businesses are the same. Cost-cutting measures which might work for some business may not work for the others. With a little imagination and experience, you can work out what is good for your business and adopt those policies or measures.

Also, it is a good idea to talk to other experts and entrepreneurs who have gone through the cycle of starting or running a business, in order to workout practices which can help save some money and boost future growth for you.

 

Mathew Jade

Mathew Jade

Mathew Jade is a business, finance and technology blogger who spends his entire day writing quality blogs. He is a passionate reader and loves to share quality content prevalent on the web. For more updates follow him on Twitter
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