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Five Strategies to Cut Costs as a New Business

StrategyDriven Managing Your Business Article | Five Strategies to Cut Costs as a New Business

Did you know that 20% of new businesses fail within the first two years, 45% during the first five years, and 65% before their 10th anniversary? These worrying statistics demonstrate just how hard it is to keep a new business afloat in today’s competitive marketplace and challenging economy.

As a business owner, you need to be looking at ways to make your enterprise more cost-efficient. Here are five strategies to help you cut costs as a new business, which one will you try first?

1. Stick to Your Budget

Every business owner knows the importance of their annual budget, helping them to plan for the year and, hopefully, yield good profits. However, it can be hard to stick to your budget, especially as a small business owner who often has to deal with unexpected expenses.

To help you stick to your budget, you need to make sure you stay on top of your finances throughout the year and track all your profits and losses.

2. Embrace New Technologies

Many small business owners shy away from investing in new technologies, either because they don’t understand how they work or because they’re worried about the cost.

However, there are lots of new technologies that are perfect for small businesses, such as payment processing management software and cloud computing, both of which offer a great return on investment.

3. Outsource Effectively

Outsourcing is a key way to grow a business while keeping an eye on costs. Assess how much it costs your small business to carry out administrative tasks such as payroll, answering the telephone, and replying to customer emails. These are time-consuming jobs that use up a lot of your precious resources, and it can be much more efficient to outsource these tasks rather than carry them out in-house. Using services from a reputable company such as Best Reception means that you don’t need to pay holiday pay, sick pay, or insurance, and, often, their rates are cheaper, which can save your business even more money.

4. Motivate Your Employees

Would you say that your employees are highly motivated? If not, then this could be costing your small business quite a bit of money. As the face of your operation, your staff has a huge impact on not just your sales figures but also the public’s perception of your business.

This means that you need them to be happy, motivated, and eager to work hard for you. There are lots of techniques that you can use to motivate your employees, such as offering remote working, giving lots of praise, and providing training schemes.

5. Modernize Your Marketing

If you’re currently using traditional marketing techniques to promote your business, this is likely to be taking quite a large chunk of your budget. Instead, it’s a much better idea to turn your attention to digital marketing strategies such as social media marketing, content marketing, and email marketing, all of which are much more affordable.

If you’re new to digital marketing, there are lots of free guides and tutorials online to help you get started.

4 Ways To Lower Costs and Increase Your Business Revenue

Businesses cost money to run. As the owner, you should be looking for ways to lower costs and save money as much as possible, without affecting your staff or production rates. There are many ways to lower your costs and the earlier you are in your business, the sooner you start saving money, the more you will have to re-invest in the future. So how can you lower costs efficiently and quickly? Here are 4 methods you can look into to help reduce the money your business is spending.

StrategyDriven Managing Your Business Article | 4 Ways To Lower Costs and Increase Your Business RevenueLowering production costs

Have you ever considered the price of a zip tie? How many do you use when building your products? If you lowered the amount in each one, how much would this save in the long run over thousands of products? Small incremental savings like this are the key to reducing your production costs through your business’s lifetime. Lowering production costs doesn’t have to be as ruthless as lowering staff numbers but by finding ways to save small amounts that add up in the long run. Automation and time-saving techniques are easier to implement. If you need to, consider other suppliers of your products to lower your outsourcing and production costs further.

Free-licence software

Many software suites now use an expensive subscription service that adds up quickly when you start to add multiple users. However, there are other options available to you. As users became tired of paying for expensive software, well developed, managed, and most importantly free, software exploded onto the market with alternatives to almost every major software suite. As a smaller business, it is within your best interests to become accustomed to what free software is out there for you. Do keep in mind though that you must consider compatibility issues between different pieces of software. Don’t waste time forcing a square peg into a round hole, when the paid-for software will do the job.

Go digital

Newer businesses have the luxury of being able to perform almost all of their admin digitally in the modern-day, with paper or hard copies rarely being required. With widespread software or mobile apps designed to provide you with paperless, digital alternatives to paper forms and documents. Going digital means you can cut out almost all of your paper documents which removes unnecessary storage and the costs associated. Yes, at some point you are going to have to print something, but if this is rare, you also save money on expensive printer maintenance costs as you only need something small to suit your need.

Speaking to financial professionals

Speaking to tax and accounting professionals is a great way to learn about what options are available to you. You may be surprised to find out where you are overspending and what your actual liabilities are in certain areas of your business. For example, in some cases, you may be able to look into a tax segregation report to cut tax liabilities across your premises. To learn more about cost segregation click here. Financial advice can cost. But the money you can potentially save makes the initial outlay small in comparison. Good professionals are worth it so invest your money into them wisely.

5 Effective Strategies for General Contractors to Cut Costs

StrategyDriven Managing Your Finances Article | 5 Effective Strategies for General Contractors to Cut CostsContractors need to devise ways to cut costs in order to remain profitable. With increased competition, the need to cut costs has become important now more than ever.

Eliminating people is not the right way to cut costs. This will only stifle the ability of your firm to make a profit. Instead, you should look for other ways to cut costs and boost profitability.

1. Cost Audit

The first step in cutting costs should begin with a complete audit of the existing expenses. You should consider ways to reduce operational expenses.

You can relocate the office to a location where the rent is lower. Also, you can consider the shift from in-house to cloud operations to cut overheads.

A lot of contractors subscribe to different software services yet don’t use most of them. Consider whether the services really add value to your business by saving time or improving efficiency. If not, it’s better to cancel the subscription.

2. Time and Contract Clause

Instead of Under-the-contract-price, you should consider adding the add-to-exceed clause. In the former case, the owner of the project only has to pay a fixed cost that includes overhead and profit. This is not necessarily the most cost-effective approach.

Instead, you should consider the time and materials contract. This is a type of contract consist of the following three terms.

  • Actual material costs
  • Actual direct labor costs at a specific hourly rate
  • Agree on add-on to cover profit and overhead

The main benefit of this type of contracting is flexibility. This cost structure allows you to adjust requirements, replace features, and cater to changed user requirements without taking a hit on the bottom-line.

3. Seek Multiple Bids

When working with a sub-contractor, you should consider multiple bids. This may take additional time, but the effort will be worth it in the end.

You may have to send lots of emails and hammer the phones. But this will allow you to lock in on subcontractors that offer services at the least costs. This extra work will help in significantly reduce the internal expenses.

4. Inspect Your Schedule

You should keep an eye on your schedule for any potential stacking or acceleration of activities. Compressing the schedule will allow you to squeeze cost advantages. Time is money and any time that is saved will have a positive impact on the company’s bottom-line.

5. Financial Prequalification

You should prequalify all subcontractors to reduce the risk in case of cost escalation. This is particularly important if the subcontractor will bear most of the risks. It will help in absorbing any deviances in a project that result in increased cost.

By financial prequalification, you can get assurance that the subcontractors will be able to absorb any costs overruns. Some of the criteria that you should consider include pipeline, days of cash, and work in progress.

The above tips can help in greatly reducing the contracting costs. Consider adding an escalation clause in all your projects as well. This will pass on the risk of cost increase to the project owners.