The formula for determining your net profits is pretty simple. You take what your business has made over the course of the month, quarter, year etc. and then subtract your expenses and costs. You’re always wanting to wind up in the black instead of coming out in the red.
How do you make sure you’re in the black? Make a lot of money. How do you make sure you’re definitely going to be in the black? Lower your expenses. This is the living definition of “a penny saved is a penny earned”.
While you should always be looking to maximize your profits, there are plenty of ways you can limit your expenses. These are especially important for any small business that’s starting out. After all, most small businesses take a few years before they start turning a profit.
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Cost-Cutting Methods for Business
Outsourcing
Outsourcing is an ideal option for many businesses who don’t require someone there full-time. Your small business may not need a full-time IT employee, so it’s best to outsource your IT needs to a firm that will charge you by the hour.
There are plenty of other options for outsourcing and they will also bring a number of benefits as well. It will always be great to have a different perspective on a strategy or project.
Go Green
Even if you’re not convinced that our world is experiencing global warming, going green will help you cut down on your utility bills. Making sure to turn off the lights, unplug appliances that aren’t in use or using a smart thermostat are all easy ways to save the planet and save some extra money.
In addition, you can double check your office to make sure it has sealed window panes in order to keep your air inside instead of leaking.
Encourage Telecommuting
Depending on the type of business you have, telecommuting may not always be an option, but with so many people simply needing a computer an internet connection for their work, telecommuting is on the rise.
With telecommuting, you’ll be able to save money on office space and utilities while it’s not in use. Additionally, you can cut down on your transportation costs as well. You don’t have to go to 100% telecommuting, but choosing a day or two is a great way to cut back on costs.
Second-Hand and Sharing
If you’re opening up a new business, it’s tempting to buy the latest and greatest out there. But if you’re going to be using your computer for email and budgeting, there’s no need to drop $1000 on a laptop. Don’t be afraid to go secondhand with some items.
Additionally, you don’t always have to buy everything. Short term and long-term rentals or sharing are great ways to manage costs and save you money.
Exchange Traditional for Social Media
It’s almost impossible to find someone that doesn’t have some kind of social media account these days. It’s the way to get news, share photos, stay in touch with friends and so much more. For your business, it’s a great way to advertise.
Making a business page is entirely free and ads or boosting your page is much cheaper than going the way of traditional ad campaigns. You’ll also be able to post about promotions, sales, events, interact with consumers and answer questions easily.
Be Wary of Interest
If you’ve taken out a small business loan, commercial real estate loan or anything else, be extra careful to monitor how much interest is accruing and how quickly you can put it off.
Left unnoticed, it can quickly build up and your left paying off more interest than you originally had planned for. Each dollar you pay towards interest is the equivalent of throwing that dollar away.
Flex Your Negotiation Skills
Many things in the business world are completed through meetings and negotiations. Everyone has their starting point and a place they will bend to. When speaking with vendors about products and prices, see what you can do to try and get your costs lowered.
You might not be the most comfortable negotiating but a little effort and confidence can go a long way into these conversations and ultimately, business savings.
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