Are your business costs spiraling out of control?
You’re not alone. A high cost of doing business is one of the main challenges the vast majority of small business owners in the United States face. Unfortunately, it’s also one of the reasons behind the high rate of small business failure.
3 Key Strategies for Cutting Business Costs in 2021
As most of these business owners, you’re looking for ways to reduce your costs and give your company a fighting chance.
We’re here to help. Continue reading for 3 key strategies for cutting business costs in 2021.
1. Develop a Clear Picture of Your Business Costs
Do you know how much money your business spends in a month?
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It might surprise you to learn that a good number of business owners don’t have a clear handle on their business expenses. You probably know how much you’re spending on the big stuff, such as rent, salaries, and marketing, but when it comes to the small stuff, you’ve got no idea.
While it’s the big costs that matter the most, the small expenses can quickly add up if they go unchecked for a long time.
As such, the first strategy for cutting business costs is to have a clear picture of all your costs. If you’re the one in charge of finances, keep track of every expense for about three months. This will give you a clear picture of what your business spends every month.
From here, it’s easier to find expenses that you can take out of your costs.
2. Put a Pause on Hiring
2020 was a terrible year for most businesses because of the COVID-19 pandemic. If your business is among the few that didn’t lay off any workers or at least managed to keep most of its workforce intact, thumbs up.
As the economy reopens in 2021, you might be looking to bring up your workforce to where it was pre-pandemic. Don’t be in a rush to do this.
Since labor is one of the biggest expenses on any business’s balance sheet, you don’t want to start hiring unless it’s absolutely necessary. Even one hire can add significant direct and indirect costs to your business.
3. Outsource Some Functions
Instead of hiring, there’s a better, cheaper option for your business: outsourcing. Outsourcing involves obtaining or receiving a service from an external party, usually in place of an internal source.
There are lots of functions your business can outsource, ranging from payroll management to marketing, IT support and even manufacturing. However, you don’t need to outsource everything.
Perform an audit and identify the functions that are running up your costs. If it’s logistics, for example, outsource it to a company that offers specialized logistics services and you’ll see a big drop in the associated costs.
Make Cutting Business Costs a Priority
Cutting business costs might seem like a tough challenge, especially if you think you’ve done everything you can and nothing seems to give. You need to be innovative and proactive, and be willing to implement drastic measures, such as the ones fleshed out above, where necessary.
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