Reducing Costs: Top 7 Ways to Reduce Expenses

Your small business can make so much more money just by reducing costs. The money you save when you reduce expenses goes right in your pocket. That old adage a penny saved is a penny earned definitely applies when running a successful business – here’s how!

There are lots of different ways you can earn more money. One of the quickest ways to put money directly in your pocket is by reducing costs in your business. Every single penny you save will affect your profit margin in a positive way and make your business more profitable.

There are both some clever ways to do this and some no-brainer ways. However, after coaching dozens of small business owners, I’ve determined there are certain methods that work across the board for practically every business. In this post, I’ll explain 7 ways to reduce operating costs that you can put into practice today.

business owner writing down ways to reduce expenses

Reducing Costs: Top 7 Ways to Reduce Expenses

When you decrease your costs, you automatically increase your profit margin. If you are trying to find ways to earn more money in your small business, look at where all your money is going first.

These 7 tips will help you put your hard-earned money back where it belongs—in your profit margins.

As you read through these hacks to reduce expenses, you’ll notice a trend: you have to organize and evaluate everything you are spending money on. You might be surprised at what you find!

It may be tough to find time to look at every single expense, but this is where your money is going and every penny counts! The more money you save by reducing costs, the more profitable your business will be.

1. Get Rid of Money Leaks

How can a company reduce costs? Well, the first way is to get rid of your money leaks. This means you should audit every single expense or subscription. Verify that you still need everything you are paying for and remove anything that is unnecessary. Delete duplicate subscriptions that are eating away at your profits.

Go through and list all recurring subscriptions and determine if any duplicate expenses.

For example – I had one client realize they were paying for 8 cell phone lines, but they no longer had 8 employees. I also had a client who didn’t realize how many cloud subscription services he had that could all be solved with one. He had signed up for Apple Cloud, Microsoft Office365, Dropbox Business, etc. He saved more than $1,000 a year just by going through the budget exercise. You may be surprised at how much you could save too!

Get My Free Budget Template

An easy tool I’ve created to help you do this is my free budget template. This is the exact same one that helped my client save over $1,000. Get it by filling out the form below.

2. Cut Cost of Goods/Service Sold

Next, look for ways that you can decrease how much it costs to create your goods or your services. Research vendors that can produce cheaper, but similar quality work.

This is another one of the easiest ways to make more money with very little effort. Here’s how that looks when you do the math.

For example: Let’s say you sell a product at $100, costs are $40 to make it, and you currently sell 30 products per month.

($100 sales price – $40 cost) x 30 sold = $1,800 per month.

If you cut costs down to $30 and sold the same number of products you will easily increase your revenue. Here’s how that looks. ($100 sales price – $30 cost) x 30 sold = $2,100 per month.

You’ve just increased your revenue by $300 per month!

The same applies if you are a service-based business. For example, you may outsource a part of your business to a copywriter or designer. It’s worth asking if they would be able to give a discount in exchange for a guaranteed monthly retainer, or even more business.

Artist sipping coffee and working on laptop

3. Work Remote From Home Office

Next, if you pay rent for an office away from your house, save money by just working from home. If you really need a place to work separate from your house, look to share a lease or sublease from someone who has an opposite working schedule from you.

For example, my acupuncturist only works on Saturdays, so she rented space from another acupuncturist who only works Monday – Fridays. Another example, one of my clients wanted space and after working on his budget, realized he couldn’t afford a space on his own. So, he split a lease with 2 other colleagues.

Be creative and find ways to cut down on how much you are paying to do your business.

4. Evaluate the ROI of Tools and Services

Reducing costs is easy when you go through and determine if you are getting the ROI and using subscriptions/tools/services that you are paying on a recurring basis.

I have clients who signed up for things but no longer use them or don’t really know how to use them, so not getting the ROI from them.

If you discover you are paying a recurring subscription for something that isn’t bringing in any sales, decide whether it is worth it to keep using that tool. Chances are, you could find a free option that does the same thing!

5. Combine Subscriptions

Another way to reduce operating costs is to go through and determine if you have multiple small subscriptions ($5 – $15) that could be solved by one tool. This could be worth it even if the larger tools might seem more expensive. It could still save you money in the long-term if you cut all the smaller tools that only have 1 feature.

For example, Microsoft 365 might seem like a really expensive tool but it’s so robust that it’s worth it. You can get MileIQ for free with it and can send a certain number of DocuSign contracts to get signed for free. There’s also Microsoft Teams included, which could replace other teleconference fees like Zoom. It also has survey/form features, so you don’t have to use SurveyMonkey or other paid survey tools like Typeform.

6. Outsource Nonessential Functions

Time is money and any time you spend doing nonessential functions is time you are not earning money for your business.

Look at the hourly rate that you charge clients. Could you save money by outsourcing some of these nonessential functions to an employee and spend that time doing client work? It’s might be very possible!

Some examples of nonessential functions include:

  • Scheduling client meetings
  • Sorting emails
  • Updating social media
  • Sending invoices

Most of these nonessential functions could even be accomplished by an intern. There are lots of ways you can outsource some of the more mundane tasks that are taking you away from earning money for your business.

7. Ask for Discounts From Vendors

Finally, reducing costs is easy when you look for discounts from vendors. Reach out to your vendors and ask them to go through your account and help you find ways you can save money with them.

If they don’t want to work with you, shop around for a less expensive vendor. While I value loyalty, it’s important to save money where you can. If you can save money on operating costs for your products, you’ll be a more profitable company.

The Value of Reducing Costs In Your Small Business

Reducing costs is something you should always strive for. About once a quarter (or at least once a year), try to evaluate all of your expenses and find ways to combine or cut costs. Especially in this technologically-driven culture, there are so many ways to find services and products at a lower cost.

Look for ways to combine subscriptions, cut out duplicates, and remove anything that isn’t giving you a strong enough ROI. Cutting costs is one of the best ways to earn more money and become more profitable.

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