Saving money as a small business can be tricky, especially when the business is struggling. Here’s a list of 27 money saving tips for small businesses to help them cut costs and build their business.
Sure, theoretical advice is nice, but when you’re struggling to keep your business going, you want real help from people who’ve lived through the same situations. I’ve collected 27 money-saving tips from real small businesses that are succeeding in a tough economy. Real people, real businesses and real ideas to help you cut costs, lower your overhead, and still reach your target market and build your business.
1. Cut traditional advertising in favor of low-cost alternatives.
This is a popular move for small businesses and thanks to the many options in Internet marketing and advertising, it’s possible to cut traditional advertising costs and still reach customers. Marissa K. Haynes of Wealth Management Group of NA, LLC, a 15-year-old business, recommends public relations as a much cheaper and more effective form of advertising. Haynes and her colleagues have used their expertise to be featured as credible sources in publications and media outlets.
John Boyd, CEO of cloud-based Meeting Wave, chose to stop paying for advertising and focus on inbound marketing. Shai Atanelov, CEO of BigTimeWireless, cut down even on paid Internet advertising (such as Google Adwords) and focused on getting results by using SEO techniques within the company website and creating YouTube videos, a move which garnered over 700,000 views and a boost in traffic to the website.
2. Get sponsors for events.
Events can be huge draws for both old and new customers, and many businesses rely on regular events, from galas to seminars, to expand their customer base. Haynes recommends getting sponsors who will help carry the expense of events in exchange for some form of advertising within the event. It’s usually a good trade for both the small business hosting the event and the sponsor paying for expenses, if the two are in related areas.
3. Outsource, outsource, outsource.
Employees are essential to getting work done, but employee costs—from salaries to office space to insurance—can be the biggest chunk of a small business’s budget. Georgette Pascale, owner of PR Firm Pascale Communications, chooses to keep her full-time staff to a minimum and outsources work to independent contractors for the work that her staff cannot cover as needed.
Deborah Sweeney, CEO of My Corporation Business Services, Inc., uses the same method by hiring consultants as needed; Sweeney maintains that she can not only negotiate a lower rate with consultants, but that her business benefits from their more varied experience in their fields of expertise.
4. Negotiate with vendors.
What you’ve been paying your vendors does not have to be the final word on what you continue paying. Ultimately, vendors want to stay in business too, and they’re dealing with a tough economy just as you are. Many are often willing to negotiate lower prices rather than lose a regular customer. Ian Aronovich, of GovernmentAuctions.org, shares that his firm was able to negotiate better prices on everything from office supplies to the phone bill. You certainly won’t lose anything by trying, and you may find yourself able to shave several hundred dollars off your monthly operating costs.
5. Think beyond the cash box.
When that cash supply gets low, as it tends to do in small businesses, don’t close the door on getting what you need. Pascale recommends the ages-old practice of bartering. She used bartering successfully by offering her own PR services in exchange for work by an interior design firm when she needed an office redesign. As with the vendor negotiation, the worst answer you can get is a simple no, and you might be surprised by how quickly you’ll hear a yes.
6. Live in the cloud.
Frugal marketing advice gurus will give you a cloud-based solution before you even finish asking your question, but real small business owners recommend the same strategy. Boyd, of MeetingWave.com, avoids the cost of expensive hardware and uses cloud-based services to host data. Bibby Gignilliat, founder of San Francisco-based Parties That Cook opts for cloud-based software, “such as Salesforce, PayCycle and Staffmate where we pay per annual user, rather than needing to purchase and maintain expensive software in-house.”
7. Cut extraneous employee expenses, not employees.
Aronovich says that his business used to provide free lunches to in-house staff, until 2009, that is, when the economy forced them to rethink their expenditures. Though neither the company nor the employees wanted to give up the perk, it was a better choice financially for them to offer a simple bagel breakfast on Fridays, save the money spent on the free lunches, and thus be able to keep their employees working rather than laying them off.
8. Embrace telecommuting.
Telecommuting isn’t possible for all businesses, or for all employees within a business, but when it is, it can be a huge money-saver. Pascale’s business was founded as an all-virtual agency from its beginning six years ago. Keeping things virtual allows small businesses such as Pascale’s to avoid the expense of office space and the ongoing operating costs that come with it, and focus on producing work at minimum overhead. If you’re not able to convert your entire staff to a telecommuting situation, find a way to convert at least some of them.
9. Go green to save green.
Going green is not only a great PR move, it’s also a smart financial move, according to Shel Horowitz, author of Guerilla Marketing Goes Green: Winning Strategies to Improve Your Profits and Your Planet. Horowitz recommends simple moves such as keeping equipment on a power strip and turning it off when not in use, or replacing your existing printer with one that prints on both sides of the paper, thus reducing paper waste and cost. Since the object of many environmentally friendly changes is to save energy, and you have to pay for the energy your business uses, if you can reduce energy use you will also be reducing your costs.
10. Hire smart, inexperienced people.
Experience isn’t everything, and it costs more. Next time you put up a job ad, eliminate the line that says, “Must have X years of experience,” and replace it with “Recent graduates welcome to apply.” Sweeney used this approach and hired developers who were fresh out of graduate school, gaining a monetary advantage by providing an entry-level salary and, she says, benefiting by having employees who are “up-to-date on the latest technology…often more nimble and eager to learn.”
11. Clarify your policy on giving.
Rather than cutting out all charitable contributions, spend 20 minutes putting together a policy that will clarify your procedures and limits. This is especially helpful if you’re in a food-based business, which can be overwhelmed by requests for “food donations” for fund-raising events, or if your business deals in other goods which charitable organizations need. Tracy Kellner of Provenance Food, a Chicago-based business, found this approach the best way to deal with the frequent requests she had to spend time answering. Instead of using her own time to respond, Kellner created a very specific policy, made it available via e-mail or as a physical document, and instructed her employees to hand it out to anyone seeking donations.
12. Negotiate with your landlord.
Joellen Sommer, a financial expert, suggests renegotiating a lease to save on costs. Gignilliat of Parties That Cook did just that and was able to save on one of the biggest expenses small businesses face. If prime retail space is important for your business, start asking about a better deal and cut down on that budget-buster.
13. Cut down on employee time.
Sommer also finds that her clients can cut many employees down to a four-day work week, which often works better for employees as well as business owners. A four-day work week means increased savings in utility and operating costs, as well as a lower salary cost for the business as a whole.
14. Practice guerilla marketing.
Guerilla marketing can not only get your business noticed, it can also save your business money. Nina Cunningham of Liberty Tax Service points to their practice of using “Lady Liberty costume wavers” and on-the-street entertainment. They’ve been using these techniques since 1997, says Cunningham, and find that “for every two hours we have a waver, we get a customer.”
15. Keep your meetings lean.
On-site meetings can be expensive in terms of travel and hosting costs, and even virtual meetings cost you in terms of billable hours or salary costs. If employees are sitting in a meeting, rather than producing work or getting new clients, you’re losing money. You can’t eliminate meetings altogether, but you can learn from David Lanagan, founder of SMB Communications. Lanagan recommends, first, that you limit the people who are required to participate in meetings. “By keeping client meetings to the lowest head-count possible,” Lanagan says, “[I] ensure that my employees’ time is well spent and that the associated costs are low.”
16. Save on shipping.
Jessie Connors, CEO of luxury e-tailer Peppermint Park, which has been noted in publications such as O Magazine, notes that her shipping manager constantly checks and compares prices on shipping, negotiates better terms, and makes sure that they save every penny they can. As Connor states, “If we save a few pennies in shipping on each product the savings falls to the bottom line and can add up to become big money.”
17. Cut down on maintenance.
Do you really need a daily cleaning service at the office? Sommer recommends reviewing ongoing maintenance costs such as these, and cutting back wherever possible. Employees can empty their own trash. A cleaning service can come in weekly instead of daily. Reduce the frequency of maintenance costs, and you can save money without reducing the maintenance or necessary service items completely.
18. Get interns.
Gignilliat found marketing interns from local schools for help with building the business’ social media program. “They blogged, tweeted and posted to Facebook regularly,” says Gignilliat, “which helped us improve our Search Engine Optimization and get more business.” And using interns rather than full-time employees cuts way back on expenses, from salaries to benefits to office space. Combine this strategy with telecommuting and you’ll be able to get a lot of work done for a fraction of the cost.
19. Review all expenses, even the little ones.
It’s just smart business practice, but it’s often overlooked until tough economic times force you into it. Aronovich remembers that, in 2009, they analyzed all company expenses to cut anything unnecessary. Small cuts in ongoing expenses can add up to large savings over the long-term. Review everything that isn’t providing a ROI, cut back to the bare minimum, and completely eliminate anything extraneous.
20. Find a cheaper way.
You can often find a cheaper way to provide the same employee perks, as in the case of Gignilliat, who cut out the $900-per-year water cooler expense and replaced it with a filtered water pitcher. From $900 to $30 is a significant savings, and if you can accomplish that sort of financial savvy in more than one area, you can turn your business into a lean, profit-generating machine.
21. Buy in bulk.
Gignilliat’s company switched to shopping the cheapest deals on office supplies such as inkjet cartridges, and purchasing from bulk warehouses or online suppliers to save money on both the product cost and the shipping cost. Analyze your ongoing expenses and pinpoint the ones that are purchased randomly or at middle-man suppliers. Check into bulk buying and see if you can’t save a significant amount on those frequent-use items.
22. Use open source software.
Software, from the basic to the complex, is essential on some level in every business. Before you spend hundreds on software purchases or updates, check into the free open source alternatives. Boyd’s company used open source software to build their online product, and you can find open source software for everything from photo editing to invoicing to accounting, project management, and document creation.
23. Do some old-school marketing.
Rhondalynn Korolak, managing director of Imagineering Unlimited, finds that the simple, old-fashioned practice of sending a hand-written thank you note to customers can have a huge return. Korolak has found that this practice alone “can lift sales by 10-20 percent,” making it a definite worthwhile investment of five minutes of time and the cost of a stamp.
24. Create partnerships for marketing.
Boyd advocates creating partnerships with other startups to cut costs and increase reach on promotional efforts. Alicia Vargo, CEO of luxury lingerie store PamperedPassions.com, concurs: “We have given up the print and radio advertising and focused on related alliances, for example bridal shops, post mastectomy businesses, photographers, hospitals and plastic surgeons. These are related areas for us. The organic partnerships far outweigh an ad or a radio promotion.”
25. Simplify your distribution process.
Atanelov allowed a financial crunch to lead to a complete overhaul of the business’ distribution system, eliminating the practice of warehousing and shipping their own inventory and turning to suppliers instead to “create a drop shipping partnership with them.” Says Atanelov, “Our supplier would ship directly to our customers for us… [they] agreed to do this on the condition that we bring in enough orders.”
Look at the distribution process in your own business and find ways to simplify or eliminate the processes involved. Focus your business and your employees on their strengths, and negotiate smart agreements to keep your business moving forward.
26. Know your customer.
This simple advice from Allen Ash of Almar Sales Co, a family business founded in 1965, is perhaps the most applicable. Think of it in terms of your particular business. If you know your customers well enough to know where they actually go online, then you can focus your online marketing efforts there instead of spreading your resources out over a whole arena of Internet options.
If you know what your customers like, how they respond, what they want, and what they’ll spend, you eliminate all the other options from your budget. Eliminating useless options means the money you do spend is more focused and will garner a better response, so you’re not only saving money initially, but you’ll be producing more profit from what you do put forth.
27. Reward your profit-makers.
It may seem a little backwards, but spending to save does make sense in some cases. Korolak recommends taking the proactive approach of rewarding profitable behavior from both your employees and your customers. What does that look like? For Conners, it means making little gestures, like an occasional free lunch or treat, to boost employee morale and keep the work environment positive.
It could also mean offering bonuses to employees who meet certain requirements for sales or productions, and offering deeper discounts or value-added packages to your most loyal customers. If you’re spending a little money on the people who do the best work for you, or purchase the most product from you, you’re simply investing in a relationship that will ultimately bring more profit to your business.