Cutting costs without compromising quality
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When you’re a startup business, you need to turn your investments into revenue and profits quickly. Most believe that improving profits is about increasing sales. However, increasing sales will often mean more marketing and acquiring new customers is going to require more investment too.
Therefore, one of the best ways to improve new business profitability is often to look at costs. Here are some of the top ways you can cut costs without compromising on the high standard of customer service you offer.
1. Business insurance
You need business insurance, there’s no question of that. It helps protect you financially from any claims made against your business from accidents caused by your equipment or any mistakes made during your work. Not having insurance can ruin your business’ chances of survival if something does happen.
However, if you just bought insurance from an agent, then you might find that you’re spending too much on your business insurance. Instead, you need to speak to an insurance broker. Unlike sales agents at insurance firms, brokers are legally obliged to provide you with accurate information. They can find you a policy that matches your exact needs at a good price.
This can save you money in one of two ways. Firstly, you can save costs on your monthly outlay by paying only for what you need and nothing else. Secondly, it can save you from claims. A broker might find that you’re missing some protection and should a claim be made against you which isn’t covered in your existing policies, you’re liable and this could cost you significantly.
2. Services
Some services you’re probably going to be paying over the going rate for. This could include leases, IT services and more. These services could be scaled back and then you can recover the lost costs. A classic example of costs that are too high is with your website. A managed hosting package is not normally very expensive, but there are services that might offer you a better deal.
In addition, you might find some utility companies have better rates than others. According to a study by Ofgem, UK small businesses often pay 50% more than they need to for their electricity. So, speak to your supplier and see if you can get a better deal.
You might also want to talk to your landlord if you lease premises. Landlords don’t want to leave their buildings vacant, it makes no financial sense to them. So, if you’ve been paying the rent on time, then it might be a great time to ask for a reduction or look for new premises.
3. Bulk buying
This is a common one that can sometimes cause problems, but might be a good option. When you buy products, you can often find that buying more lowers the unit price. This allows you to make more profit per unit sold. This saving is either done based on the number bought, reducing the price per unit, or the shipping cost being split between more units.
The biggest problem with bulk buying is where to store all the products. This could cost your business more money, so you might need to conduct a cost-benefit analysis for this approach.
4. Recognise staff performance
Another thing that you can do is to create an employee recognition system. This might seem counter-productive, but giving staff a well-time reward for good behaviour can actually save on costs over the long term.
Staffing costs are often the largest expense of any small business and recruitment is very expensive. If you need to replace a staff member, the cost of recruitment and lost productivity can be up to 150% of the employee’s annual wage. By improving job satisfaction, you reduce the number of people taking absences or leaving your company, saving you money in the long term.
In addition, staff recognition is linked to higher performance levels. So, while this might be an initial cost, the actual benefit might be larger.
5. Ditch some marketing expenditure
Another expense is marketing. However, not all marketing is created equal. Some marketing avenues like PPC and print adverts can be rather expensive. You have to be sure that the campaigns you’re running are having a positive effect.
So, be sure to do an analysis to check that your marketing is having a positive impact on your profitability. If a strategy is too costly, perhaps you need to drop an option.
Conclusion
There are many ways that you can save money within your startup business. Everything from business insurance to staff recognition can be utilised to save on costs and improve your business’ profitability. How you do it is up to you, but an effort on numerous fronts is often the fastest way to improve your business’ performance.
