Cost cutting is a phrase that many view with distaste, as it is often heard on the news in connection to lay offs and branch closures as company boards try to maximize share prices. In the realm of small to medium enterprise though, cost cutting measures can mean the difference between staying in business or shutting down the doors to your SME forever. So here are some useful tips on how you can use cost cutting strategies in a meaningful way in your SME, which will help keep your overheads low and your cashflow healthy.
Note: you may be wondering “what is SME?” SME stands for small/medium sized enterprise.
Common Cost Cutting Measures that Could Save your SME
One rock solid rule of business is to hire slow and fire fast. It may sound cut throat but the simple fact of the matter is that if you have more employees than your revenue can support, you will go out of business. If you lose a big client, that loss of revenue needs to be accounted for by either signing more business or cutting your fixed costs.
When your business is starting out, part time employees and contractors will be of great assistance to you as you try to keep your payroll as low as possible. All-rounders are also great hires, as an employee who is capable of, and willing to wear many hats in the organisation can go a long way to keeping your payroll costs in check.
Part time employees and contractors also allow you to minimize the costs associated with what is usually your second biggest expense after payroll. Keeping your office space costs as small as possible is key to controlling your overheads, and if you have part time employees, they can often share a desk if they come in on different days of the week. For contractors, there is the possibility of working from a virtual office, saving you even more on office space. It could even be feasible to base the whole business from a virtual office, and only hire rooms at the address when a face to face meeting is required.
Cloud Data Storage
Running your own servers is expensive for a variety of factors, as you have to buy the equipment, pay for power and also have someone on staff to maintain and manage it all. An easier and cheaper solution is using cloud storage like Dropbox for your data storage needs.
Marketing is often one of the larger costs in a business, and also (tragically) often one of the first to be cut. Marketing done properly is meant to generate more money than it cost, so ideally marketing is not a cost at all, rather a revenue generator. Rather than cutting your marketing budget, move it into a form of marketing that is completely trackable, so you know exactly where each dollar is going and how much revenue is being brought in for each dollar.
It may seem so obvious that stating it is redundant, yet many businesses do not think about how to minimize their power costs. Something as simple as putting all your computers on a central switch, and turning the lights and air-conditioning off at night, can save a substantial amount of money each year.