How to reduce operating costs cooler than GaryVee: 11 practical ways
You can keep your business running efficiently during these challenging times by managing to reduce the operating costs of your business.
By this term, we mean the expenses that are required to keep a business fully operational.
We think it’s a wonderful solution for businesses to survive the critical conditions created by the spread of Covid-19.
The Coronavirus pandemic left a negative impact on almost every business organization. Among them, small businesses were the ones greatly affected by this health crisis. Most of their owners have been struggling to keep the business up and running.
As a small business owner, perhaps you’re also a victim of this unprecedented economic crisis. You’ve tried your best to find ways to protect your business.
But no worries. If you manage to take these extra costs under your control, you’ll see the light on the horizon.
In the following sections, we’ll go over 11 ways you can use to lower operating costs.
These won’t work like magic. There’s no one-size-fits-all solution that applies to all small businesses. But they should be enough to help you decide what works best for your business.
Always remember, a penny saved is a penny earned. It doesn’t matter how much you’re able to cut down costs. What’s crucial is that you have to take even the smallest step to achieve progress in this case.
What are operating costs?
Operating costs are defined as costs necessary for the day-to-day maintenance and management of a business. The term is also commonly referred to as operating expenditures, operating expenses, operational expenses, or simply OPEX.
For the sake of this blog post, we defined the term in the shortest possible way. Click this link to learn more about operating costs.
Examples of operating costs
One central element of operating costs the cost of goods sold, also mentioned as COGS. These are associated with the amounts you spend for providing your products and services to customers.
Some other typical expenses may include:
- Labor – primarily payroll, is another large portion of operational costs
- Benefits – such as health insurance, pensions, etc.
- Sales commissions
- Amortization (Repayments of loans and debts)
- Deprecation (The gradual loss of assets’ value)
- Maintenance – i.e., for building upkeep or equipment
Probably most of these expenses are hard to take under control. But there are other insignificant ones that, when added up, will leave a negative impact on your business.
The good news is that there are controllable expenses you can manage. You must know how to measure these costs in general to maintain profitability.
What you can do to reduce operating costs
Identifying the operating costs should not be much of a challenge to you.
By simply walking around your business’ office or reviewing the income statement, you’ll quickly notice what’s sucking excessive resources from the budget.
After uncovering the areas consuming extra budget now, you’re thinking, “What can I possibly do for cutting their costs?”
We’re here to help you answer that question.
Below you’ll find 11 ways that can help you reduce the operating costs of your business.
We know this suggestion might seem relatively new to new. And it is, in fact, a novel approach. But novelty and creativity are what push you to stay on top of your game, right?
This cost-efficient method is by far the best among other ways you’ll read in this blog post.
Part of your responsibility as a small business owner is to advertise and grow without breaking the bank.
With the infinite range of options available for you to do this, it isn’t easy to decide where to start.
We are bombarded by annoying ads from different brands each day, on the street, on our devices, and at home.
The costs of these ads are really high. Besides, do people even pay attention to them?
There answer is a big NO. Ads typically annoy everyone.
Today, it’s time for you to act smart and promote your brands through Instagram influencers at a fraction of the cost of online ads.
Influencers post about specific topics like Fashion, Fitness, beauty, health, and more. And when an influencer promotes your brand, their audience listens and takes action.
Ainfluencer makes influencer marketing a reality for any size business.
Create a free ad on the marketplace and let influencers reach out to you or search through thousands of targeted influencers and make deals to promote your brand.
Then invite influencers to collaborate and connect to make deals. You decide the price number of deals and always see the results.
At Ainfluencer, we strive to help you with a smart platform that is fast, easy to use, secure, and, best of all, FREE!
So what are you waiting for? Promote your business and at the same time reduce its operating costs with just a few clicks.
All you need to do is create a free account and post an ad to get started.
Allow employees to work from home
Is it necessary for your employees to be present at the office? Ask yourself as you’re reading this.
Your answer is probably negative. At least we can agree that you don’t need each and every employee to work from the office.
More than ever, a large number of businesses are inclined to leverage the internet and management tools to allow a portion of their workforce to work remotely.
Telecommuting has many benefits.
It amounts to a decline in expenses, boosts employee morale, and helps retain workforce efficiency.
Plan to survive recessions
The recent health crisis has created lots of economic hardships for most businesses.
As mentioned earlier, small businesses suffered immensely from this pandemic. Most were either forced to temporarily shut down or had to close permanently.
Aside from its negative consequences, this crisis taught us a valuable lesson.
If we want to survive any difficulty, we have to pray for the best and prepare for the worst. And preparing for the worst-case scenario calls for advanced planning by business owners.
Owners and managers should consider some options to navigate through economic recessions.
There are some options to think about when planning for such events.
You may want to consider alternative services or products to sell instead of the current ones.
Or try identifying talented employees and potential managers that could help your business in dire times.
You can easily save yourself from spending additional costs by preparing for any possible financial hardship.
Test a 4-day workweek
The idea of a 4-day workweek has grown in popularity and gained momentum in the aftermath of Covid-19.
Around a month ago, the Spanish government agreed to pilot a 32-hour workweek over three years without a decline in the worker’s payroll.
As an example of this method’s efficiency, we can refer to Microsoft Japan.
The company allowed the whole workforce to work remotely on Fridays for a month and witnessed a 40% boost in terms of sales per employee.
As data suggests, you can see that a 4-day work week actually works and can further help your business reduce its operating costs.
Hold meetings online
Meetings are a core element of every business’ regular schedule. Owners and managers hold meetings to gather information from other heads within their business and make better decisions.
With the spread of Covid-19, online meetings have become a part of the workflow and better understand their importance.
Instead of forcing your employees to come to the office, try scheduling online meetings.
The less you use the office building, the less you have to worry about the electricity bill and building maintenance.
Simply put, hold business meetings online and save yourself from extra costs.
Use technology to increase your business’ efficiency.
You achieve the best OPEX reduction results when you less engage direct labor with doing various tasks.
Let computers and software take care of the most time-consuming tasks.
Various online systems and software programs can help you automate most functions.
These online services and programs can easily manage some parts of your business, such as accounting, customer relations, staff management, and more.
Don’t get into debt
There are times when you feel the need to take out a loan to fill a budget gap. That’s actually what most owners might need to either kick-start a business or keep it functioning.
Despite the numerous advantages attached to this financing option, you should be aware of its drawbacks.
One key downside of choosing loans is that you can quickly get into debt.
Since you’re looking for ways to reduce your business’ OPEX, you should avoid loans.
We suggest you review other alternatives for financing and consider loans when absolutely necessary.
Use less printing
Think of the number of copy machines you have in the office. Are they really a part of your business’ overall efficiency?
Chances are, you or your staff are using most of these machines to make copies of documents that are of no use to anyone.
Plus, the more copies you have, the more space you need for storing them.
We’re immersed in a digital world with a wide range of options to store files online.
Instead of wasting resources on printing, try using cloud sharing services like Dropbox or Google Drive for keeping your business’ document files.
However, paper copies are sometimes needed, and we can’t completely stop using them.
The idea is to make less use of printing to reduce operating costs better.
Students and graduates make up a considerable part of every society.
Their knowledge is up to date, and they’re looking to put all they’ve learned into practice.
Hiring these people can sometimes be a significant saving over hiring an expert workforce.
Although you may have to provide them with additional training, they’ll still be able to do a large portion of your work for you.
Of course, their set of skills won’t be offered for free. You still have to pay them.
But in comparison to what you pay an experienced employee, it’s much lower, and interns will get the job done.
Our last but not least suggestion to successfully reduce your business’ operating is to hire freelancers.
Businesses and brands are increasingly hiring freelancers (also called ‘on-demand workers’) to fulfill their work needs.
The top advantages of hiring these individuals are their cost-effectiveness and expertise.
Freelancers will provide you with the skills you need, and you’re only required to pay them in return.
Therefore, compared to a full-time employee, you’re not responsible for a freelancer’s benefits such as health insurance and pension.
And when you weigh the pros and cons of hiring them, you’ll understand that you save more resources when you let freelancers do the job for you.
The idea of outsourcing is to let anyone outside your business carry out specific tasks for you.
Allowing third-party individuals to do certain business practices can help your staff concentrate on crucial tasks like customer support or generating leads.
This option is really beneficial, especially when you don’t have enough knowledge of a field or hire a permanent workforce to be costly in the long run.
For example, one potential area where outsourcing may be the right choice for your business is IT operations.
Investing large amounts of money to build your own IT infrastructure is not a good idea. For small businesses, that is close to impossible to do.
Instead use internet hosting services for creating and managing your website.
We think by now you understand the main point of this blog post.
The key to reduce your business’ operating costs is nothing but improving its efficiency.
So don’t ever forget that achieving efficiency amounts to a reduction of most unnecessary expenses.
Most business owners don’t consider that minor expenses can accumulate and overburden the budget. They think that increasing profits is the key to their success.
These owners often neglect the simple fact that cutting down these expenses is also a contributing factor to profitability. These costs can have an adverse effect, especially during challenging times.
Therefore any business must manage and secure its finance to prosper and remain successful.
We also understand that reducing operating costs has its unique challenges.
Carefully executing an OPEX reduction strategy is vital to maintain a business’ ability to generate revenue.
Still, even the smallest effort for lowering operational expenditures is worthy.