Top Tactics for Taming Operational Costs

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Top Tactics for Taming Operational Costs - Man using a calculator
Kevin SageKevin Sage
August 28, 2023
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UPDATED:
September 15, 2023

Operating costs can eat away at the profits your small business earns, if you're not careful. Operating costs are the sum of your operating expenses (or the costs of running your business from day to day) and cost of goods sold (COGS). Over time, these costs tend to rise, forcing smart business leaders to keep close tabs on their expenditures and make tough cost-cutting decisions wherever it seems frugal.

Here are some simple yet powerful ways to control rising operating costs at your small business.

Strategies for Controlling Operating Costs

Encourage remote work

Woman working from home

Remote workers tend to cost businesses less than employing the same workers on-site. For one, you don’t have as high utility and building maintenance costs to pay to support a large in-house staff. You can shrink or altogether eliminate a physical office space this way.

Automate busywork

Time-consuming tasks that don’t require an employee’s direct attention and abilities can easily be automated to free up that employee to do more important work that does require those human resources.

Dozens of software programs and online systems exist to streamline day-to-day small business functions from accounting to marketing communications, from payroll to lead generation.

Automation supports efficiency, reducing such operating costs as direct labor; it can also work faster and make fewer mistakes than people.

Outsource

When technology won’t suffice and you need a human worker or team to perform certain tasks, consider whether you can outsource them. This can be especially beneficial when focusing on those tasks in-house can distract attention from the core business.

It may help you to retain this focus on your core business, for example, to outsource your IT, human resources or marketing and advertising departments.

What’s more, farming out infrequent or on-demand tasks to freelancers can often be a more efficient use of capital than assigning those tasks in-house. With freelancers, you don’t have to pay insurance or payroll taxes or provide accruing benefits like paid time off.

Use interns

Interns

Even more cost-cutting than outsourcing work and utilizing freelancers is hiring interns whom you can pay nothing or next-to-nothing in exchange for the opportunity to learn and practice essential business skills and gain professional, real-world experience through on-the-job training.

Besides the reduced pay and benefits you would be putting out to interns vs. employees, you also lower your recruitment and training costs. That is, if you have an intern you like, you can always hire them permanently rather than hire from outside the business and, then, train your new-hires in how you want things done.

Negotiate new deals

You can control rising operating costs in your business relationships by negotiating better deals with existing vendors and entertaining bids from new vendors. Unless you have a contract you can’t legally or affordably break, you’re not locked into any business relationship you form. You can always seek out new and better relationships or simply improve your existing ones.

Pay your bills ahead of time

You can often get a discount from certain vendors by paying your invoices early. Even when that’s not the case, paying your bills early can help you avoid accidentally paying them late and incurring late fees and penalties. Apply this same thinking not just to invoices but to loans and other debts as well.

Go green

LED lamp

Choosing eco-friendly products and services doesn’t just allow you to help save the planet, it also helps you to save on operational costs. An LED or compact fluorescent light can cost you much less in energy bills than a standard incandescent light bulb. Improving your windows and insulation can help you reduce heating and cooling costs. Unplugging unused workstations can cost you less in electricity costs.

Go paper-free

Another way your budget can benefit from going green is by reducing your use of paper products. Thanks to digitalization, there’s no longer any need to print up so many documents and store them in your physical facility when you can now send and receive those same documents–even sign them–electronically.

Avoiding all that printing doesn’t just save you in paper, it also saves you in expensive ink, toner and machine maintenance, repair and replacement costs, as well as the costs of office space and staff to manage the storage of all those printed documents.

And, when you do need to print something up, like flyers or company catalogs, print them up in batches small enough that you won’t have wasted copies sitting around to get rid of; you can always print more if you need to.

Reduce waste

Man calculating costs

Inefficient practices and procedures waste precious time and resources, which ultimately amounts to your money. Encourage your team to identify any inefficiencies in your systems and operations and offer their potential solutions.

Another way to eliminate wasteful expenses is to cancel any ongoing services you don’t actually use or need. Examine all the subscription fees you pay monthly or on some other recurring basis to see what you could really do without. You may even have some services set up for automatic recurring payments that you don’t even know you have. One place to look for these inefficiencies is in all the software-as-a-service (SaaS) apps you pay for but never actually use.

With some services, you may use some of the features but not all of them. In these cases, you can either downgrade to a lower-cost subscription for just the services you use or shop around for another SaaS product with a more suitable subscription plan for your needs.

Taking an audit of these recurring costs is not something you do once and forget about; rather, you should regularly examine your recurring expenses to see if there are services you no longer need or can find new ways to streamline. Try setting up reminders either quarterly or biannually for such an audit.

Utilize free apps wherever you can

Another way to streamline recurring expenses is to find free apps that allow you to perform the same tasks you're currently paying to perform. Many apps offer their basic service free and allow you to upgrade when necessary. Why pay for a service you can get somewhere else for free?

Regularly auditing your small business’s operating expenses to gauge their effectiveness and making smart cost-cutting decisions where and when you can is a powerful tool to control rising operating costs and increase your profit margin. This includes how you invest in your online presence. We need to show you how your business is doing online, contact us for a free business report!

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