This post by guest blogger Suzanne Kearns appears as part of our series Small Business 500.
What do you do when sales just aren’t what they used to be, but operating costs continue on the same path? You cut down on expenses, right? While many business owners think they’ve already cut their small business expenses to the bare bones, there still may be room for reductions. Hard times call for hard decisions, and some of the suggestions below could radically change the way your business looks and operates. But they could also drastically reduce your expenses, which may allow you to stay in the game until the economy turns around. Here are five potential areas to cut expenses you may have overlooked:
1. Carry less product
When business was booming, business owners typically carried a range of products and styles to ensure they would have anything a customer might desire. Though times have changed, many store owners continue to carry a huge inventory, which ties up large amounts of working capital.
Instead, carry less inventory and offer customers other options, such as special orders and the ability to ship products directly to their home. If you market the new paradigm correctly, customers will walk away feeling like they’re dealing with a “boutique” business, and they won’t mind waiting for unique products.
2. Go low-tech
Sure, technology makes life easier for your employees, but when times are slow, the cost of that convenience may be dragging you down financially. Is it necessary for your salespeople to have the latest and greatest smartphone or BlackBerry, or will a slightly older model do?
Take a good look at the gadgets and technology that are a part of your everyday business and determine whether it’s costing you too much. If it is, break the news gently to your employees and potentially save yourself hundreds – if not thousands – of dollars in expenses.
3. Eliminate salaries
It’s a hirer’s market, and if you can offer a potential employee a realistic commission-only pay scale, you’ll have people lining up to take the job. The obvious benefits are that you only need to pay out when the employee generates income for you, but there are other benefits as well. If an employee knows that payday only comes when they produce, they will be more invested in selling your product and services, which may result in decreased labor costs and increased income. Obviously, not every position can be paid in commission, but many of your employees can be partially paid on a performance-based salary.
4. Encourage cash transactions
How much do you pay in credit card processing fees? If you do a lot of business, those fees can add up to substantial expenses every month. By now, most small business owners have shopped around and found the least expensive credit card processor. But even if you’re only paying 3% per transaction, the fees can add a huge chunk to your overhead.
Counteract the negative effects of credit card transactions by offering your customers incentives to pay with cash. For example, you could offer a 1% discount on cash purchases, or require a minimum purchase amount to pay with a credit card.
5. Lose your office space
How much do you pay in monthly expenses to provide your employees a place to work? The great thing about current technology is that you don’t have to provide them a desk in an office anymore – employees can work from home and telecommute.
Create a plan to transition your employees out of the office and into their homes. This can allow you to drastically reduce your monthly expenses by eliminating the monthly lease or mortgage payments, as well as all of the expenses that accompany a physical office location, such as utilities, parking, and maintenance.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.