A great idea is a good way to start a business, but the cost of doing business is what will determine if you stay in business. For some businesses, despite high product sales, making ends meet each month may still be difficult. If this situation sounds familiar, then it may be time to start looking at how to reduce your business operating costs.
The saying ‘the cost of doing business’ should mean more to you than just being a catchphrase. It should make you think about how much it costs each month to run your entire operation. From staff costs, to utilities, to the cost of printer ink, it all adds up and takes a bite out of your profits. In order to increase the amount of money your company makes every month, reducing your business operating costs is a step in the right direction.
In today’s post, we’ve put together a list of three ways to help reduce your business operating costs in order to make your business more efficient.
Tips to Reduce Your Business Operating Costs
#1 – Outsource
The first step in reducing your business operating costs is to look at your staff requirements. While staff are crucial for keeping a company up and running, it may not be necessary to handle all jobs in-house.
In-house staff can be an expensive overhead expense for a company. Things such as training, sick leave, insurance, and office equipment all add up and can be quite costly. But what if you could contract out certain aspects of your staffing requirements? You could still get the labor required, but you could do it without many of the associated costs that go with it.
To illustrate this point, let’s look at the example of a small business. Businesses today require various forms of technology to run their day-to-day operations. But inevitably, some of this technology will break down. Because this doesn’t usually occur multiple times a day, it doesn’t make sense to have an in-house IT department. Instead, this work can be contracted out to an IT company that can fix your issues on an as-needed basis.
Another example is bookkeeping for small businesses. Often, the business owner or another staff member looks after tracking all the invoices, payments and payroll. While you can pay for an in-house person to undertake this task, it can also be outsourced to a bookkeeper on a contractual basis.
#2 – Focus on Existing Customers
While it may sound counter-intuitive, if you want to increase sales you should focus your attention on your current customer base.
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According to Outbound Engine it can cost five times more to acquire a new customer than retain an existing one. Additionally, you have a 60-70% chance of selling to an existing customer, while only a 5-20% chance of selling to a new customer. When laid out like that, it just makes a lot of financial sense to devote much of your marketing focus on customers you already have.
Now this isn’t to say that you should abandon all efforts to attract new customers. However, many companies have made the mistake of ignoring their current customer base because they spend all their time looking for new customers. In doing this, they are missing a golden opportunity to encourage more sales from an already loyal customer base.
#3 – Use Automation to Reduce Business Operating Costs
Technology has come a long way in the last 20 years and these advancements can benefit your business. You can now automate basic and routine tasks to ensure a better quality of service for your customers. The added benefit is that you can remove the need for staff to do basic repetitive tasks which frees up their time to help with the more complex tasks.
One way to use automation to your advantage is by using chatbots in your online business. Chatbots programmed with AI have the ability to carry out basic conversations with customers. This allows them to be available 24/7 to answer simple questions. Any inquiries that require a more in-depth response can then be forwarded to a staff member to handle.
Another way automation can help reduce business operating costs is to handle small daily tasks. For example, if a new site visitor makes a purchase on your site, there are software packages available to automatically add that person to your email list. You don’t need someone to monitor every order and update your contact lists manually.
When companies get their spending under control and make work processes more efficient, profits increase. If your company is not operating at a level you are happy with, it might be time to restructure and implement some cost saving measures.
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Jolene is a strong operations, compliance, and paralegal manager. She also loves to research and write about business as well as personal topics that help others.