From office space to outsourcing services and everything in between, many small business owners know the difficulties of working on tight margins. Whether you’re a freelancer working as a team of one, or operating with a handful of employees, reducing operating expenses should always be a consideration. If you’re looking to reduce operating expenses and generate more revenue, below are 4 tips to help you improve cash flow!
1. Leverage Technology to Minimize Operating Expenses
Many small businesses owners may not know this but there are myriads of online and software programs with automated small business functions. Many facets of a business such as accounting, payroll, marketing communications, and web hosting have benefited from systems and services that make it that much simpler to manage your business. To choose the right software to minimize operating expenses, reflect on the following questions:
- Know yourself — What do I know how to do really well? (i.e. if you were never really a mathematician, and have always struggled with money management, then outsourcing your finances would probably be a good idea)
- Reflect on manual tasks — Are there any tasks that I spend far too much time on each week?
- Plan ahead — What is the most time-consuming task that I can take off my plate, right now?
Once these questions have been answered, you can better predict and take action on which tasks or subject area to rely on technology for.
2. “Shop Around” to Find the Best Suitable Cost
Work with vendors on a regular basis? Try setting up a bidding system for project work. Asking three different vendors to provide a quote can help increase competition—allowing you to identify the bid that’s the best “bang for your buck.” Similar to how you shouldn’t get too comfortable with one job, it’s important to constantly challenge the status quo to see what else is out there that can help minimize business expenses.
When requesting for bids, it’s important to know exactly what services you are asking for. Do this by creating an accurate scope of work using a work breakdown structure (WBS) and through a request for proposal (RFP) for vendors to bid on. This is key, as missing information or added complexity can negatively affect the quoted rate later on.
3. Work From Home If Possible
Having your own office space is nice, but leasing this space comes with added utility and management expenses—all of which are a drain on your financial resources. To reduce operating costs, allow your employees (and yourself) to work from home, if possible. Connectivity nowadays are so prevalent to the point where sitting in an office vs. sitting at home produces nearly the same amount of productivity. As an added bonus, both you and your employees will enjoy this freedom since commute times and expenses are minimized in the short and long run.
4. Outsource to Reduce Overall Expenses
For some small business owners, it can be a pain point to outsource certain areas of a business to an external consultant. However, it’s also important to point out the added benefits of doing so. For instance, some businesses prefer not to outsource marketing and advertising since the advantages are not immediately clear. While it might seem that outsourcing work externally may lead to increased expenses, the truth is, delegating specific tasks to subject matter experts can lead to cost savings in the long run—especially if you aren’t an expert in that particular subject (i.e. finances or IT).
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