For as much as you focus on increasing revenue to maximize your profits, you should put an equal amount of attention on reducing your operating costs. Unchecked overhead can quickly add up and undermine the sales you’ve worked hard to make. Take time to evaluate your business costs, particularly in these areas, to determine how you can reduce them.
Energy and utility costs
You want to keep your office comfortable, but you shouldn’t need to run the HVAC system constantly. Brian Martucci of Money Crashers offers a multiple suggestions for decreasing climate control expenses.
He recommends investing in a programmable or smart thermostat that will automatically adjust target temperature based on the time. “At a 9-to-5 office, that probably means increasing the heat or AC in the morning and dialing it back (or turning it off completely) in the evening and overnight.”
You can also improve your office’s insulation so the air system doesn’t need to run as often. Martucci advocates for installing double-pane windows, updated sealing and weatherproofing around any openings, hanging light-blocking curtains on hot days and using a solar water heater that uses the sun’s radiation to warm your office’s water.
You’ll also pay less for utilities if you have fewer workers in the office. Encouraging your staff to telecommute and work from home will lower your water and electricity bills while increasing their job satisfaction.
Full-time employees cost you a lot of money, and depending on the work they do, they might not earn you that much in return. Martucci recommends using freelance or temporarily contracted workers for tasks that could be easily outsourced. Also consider making some roles part-time to reduce salary and benefit expenses, or explore the possibility of creating a seasonal intern position.
Susan Ward of The Balance Small Business suggests having family members fill roles in your company when possible — especially young ones who could use work experience. Also talk with your employees about taking unpaid time off if they’re financially stable.
When you calculate your monthly expenses, you’ll probably see the rent or mortgage payment as one of the biggest numbers. Peter Daisyme of Due.com recommends reevaluating your current facility to see if it’s worth the cost. Do you need all the space you have? If you aren’t utilizing some of the building, you could either sublease that space to recoup some of the cost or move to a smaller building — especially if you encourage your employees to start working from home.
Think outside the building too: Do you need all that yardage and parking spaces? Do you need to stay at this current location, or could you move to one in a less-populated area with less expensive rent or property costs?
Do you need to have all the materials you’re currently paying for, or are you paying for excess stock you’re using inefficiently? In an article for American Express, business consultant Royale Scuderi strongly recommends looking for ways to cut material costs and optimize your resources. Are you ordering more materials than you require? Consider purchasing supplies on an as-needed basis instead of preemptively. What are you doing with your old or excess materials? For instance, Scuderi says, “Try selling leftover cardboard, paper and metal instead of sending it to the recycling center. Also, consider ways to use your waste to create another product.” You can also probably make a couple bucks on old electronics and equipment when you replace them with newer models.
These are just a handful of the many possible ways you can reduce your business expenses. Take the time to perform a full audit of your costs and talk with your staff and financial advisor to brainstorm ways to reduce overhead.