Cost-Cutting Tips For Small Businesses

Use these cost-cutting tips to scale back while still facilitating growth and boosting the bottom line of your small business.

Cost-Cutting Tips For Small Businesses

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Cost Cutting for Small Business Owners: How to Boost Your Bottom Line

Keeping costs down is an essential part of operating a small business. Your profit margins are usually much tighter than your larger counterparts, meaning you need to be a lot savvier about how you spend your cash.

In both good times and bad, you should always be looking for clever ways to ensure that you aren’t spending beyond your means and limiting your growth potential. You never know when a big client or a regular one might suddenly back out or not pay. 

This could spell disaster for a small business.

The good news is that it doesn’t have to be doom and gloom. But only if you’re paying attention and know what you’re spending.

In this article, we’ll reveal how you can cut costs and boost your profits while keeping your business operating at its optimum. 

The Difference Between Fixed and Variable Costs

Firstly, let’s look at the kind of expenses that a business usually has. These can be broken down into two categories:

  • Fixed Costs – These are the expenses that come with the day-to-day running of your business. They include expenses like rent or rates for your premises, your internet, computers and other equipment, salaries and insurance. They’re fairly stable costs and you can budget for them each month and each year.


  • Variable Costs – These expenses are the ones that are linked to your sales. For example, the more products you sell, the more stock you have to buy to keep up with the demand. These costs are harder to budget for because they are directly linked to how much you’re selling.

It’s the fixed costs that you generally want to look at when you consider cutting down on your business expenses. 

You don’t want to be cutting back on buying inventory or raw materials if your sales are up.

5 Steps to Boost Your Bottom Line

Now, let’s look at how to keep those costs down and where you can save money when times get tough:

1. Understand Where Your Money is Going

The first step is to know exactly what you’re spending your money on. It’s vital to know exactly how much you spend every month and every year. 

If you don’t know these figures, it becomes impossible to work out where you’re spending too much and where you can adapt your spending.

Draw up a spreadsheet that shows you hard monthly and yearly costs, and break those down into different categories. These should be areas like staff salaries, office equipment, office amenities, subscriptions to software, and any other ongoing costs.

From here, you can see if there are ways to reduce what you’re spending. For example, you can buy a cheaper brand of coffee for the office and see a big reduction in monthly expenses. 

Small changes can make a huge difference, especially in lean times.

2. Look for Free Resources Where You Can

Speaking of subscriptions for software, why not see if you can reduce your spending by using free software? You can try Google’s Workspace instead of paying for Microsoft Office. 

If you’re paying for a social media marketing tool or something similar, see if you can get away with the free membership or maybe reduce the number of accounts you have on the software.

Of course, you won’t always be able to find a free resource to replace the one you’re paying for. 

However, you might be able to reduce costs by shopping around and trying out a competitor. You could even talk to your current provider and see if they will offer you a discount for being a loyal customer.

3. Automate as Much as Possible

Automation is a great way to cut down on costs. You may not see it in an actual price, but you may free up employees and yourself to focus on other areas of the business and manage to increase efficiencies and sales. 

You may also be able to get away with a smaller staff contingent or not need to hire anyone new thanks to automating tasks.

There are plenty of automation options now from AI chatbots for customer service to virtual assistants and even automated email systems that follow up on payments from customers. 

You can even get inventory systems that link up to your sales systems and automatically place orders for new products or raw materials.

4. Outsource Some Roles

Sometimes it pays to hire an expert in a specific field who can work for you on a retainer basis rather than as a full-time employee. 

This could be an accountant to help you with your finances, or a marketing freelancer to help you with spreading the word about your business. 

You won’t have to incur the cost of a full salary, but you’ll still get the benefit of their expertise.

5. Switch to Free Marketing Options

Speaking of marketing, there are plenty of options that don’t require a large advertising budget. You can get a lot of traction through SEO on your website, blog writing, and social media marketing. 

These aren’t all completely free, but they can cost a lot less than traditional advertising, and save you quite a bit of money in the long run.

The key is to find out where your target audience is playing and make sure that you’re on the same platforms. 

You might want to get an expert to help you with a strategy. They can then train you to do the posting and connect with customers yourself. 

It’s a far more cost-effective method of getting the word out there about your small business.

Build a Stronger Business with a Better Bottom Line

A small business usually has very little leeway between income and expenses. That’s why it’s so important that you know how to calculate profit margin to keep your finances under control and in a  comfort zone. 

Even if you have no intention of growing your business beyond where you are, you need to stay in the driver’s seat. This means you need to know how to keep costs down and your bottom lines up.