Since the 2008 global financial crisis, businesses have been trying to trim the fats and cut expenses wherever they can. Until you make it big (and really, even then), the number one lesson in increasing profit is obviously linked to reducing expenses–every penny you save really does count! Moreover, you will find that the steps your organization can take to reduce its expenses also often reduce its carbon footprint. This is not merely good for the environment, ecologically conscious companies also set themselves apart from others, which might be a draw for clients. For every type of organization, here are five ways that you can lower your operating costs.
Since every company out there is trying to cut costs, many innovative ideas have come about to revolutionize how an organization functions. For example, take advantage of co-working spaces! Especially in big crowded cities, leasing a full office space can be one of the major expenses for a company. If their physical presence is not really necessary, allow workers to telecommute. You save on office space, relocation costs and also expand your pool of qualified employees when you are no longer geographically bound.
Salary and benefits are of course another major drain on company’s resources. Any organization needs workers and workers’ salary is a big chunk of a company’s expense. There are many things you can do to reduce spending in this department: make use of interns, cross-train your staff to perform more than one function, offer non-monetary benefits like flexible hours and extra vacation days even if salary is lower. These benefits might also aid in the retention of employees (indirectly saving on recruitment costs).
Take advantage of the proliferation of software these days. If you make use of an accounting software, you might still need to consult an accountant on a freelance basis, but your organization will have saved on hiring a full-time accountant. Also, since every penny counts, do make use of free softwares like Google Docs instead of paying for Windows. Use your tech-savvy entrepreneurial drive to hunt for software that can cut costs in your business. At the very least, digitizing your business saves trees!
4. Social media
That brings me to social media as an advertising platform. Most companies cannot avoid marketing and advertising costs. But one way to spread the word about your company and keep it competitive is through maintaining a good social media presence. This can be something as simple as keeping a Twitter page where you can tweet about new products or your organization’s events. Social media is also a good way to make your brand known among related companies in your field.
5. Cost-benefit analysis
Cost-benefit analysis is a staple in business and no new idea in the way we do business today will be able to supersede it. The fundamental goal in business is still to make sure that your benefit/profit exceeds the operating cost. Keep in mind that when you do cost-benefit analysis, taking the net present value (NPV) of the project into account will help to ensure more accurate results by accounting for variables like inflation and risk-adjusted value.
So there you have it! Five prudent business practices that can protect your profit margin by lowering your organization’s operating costs.
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