Owning and operating a business is expensive. While larger businesses often have significant financial backing to counteract these costs, small business owners need to be more resourceful. Implementing some effective cost management techniques should keep you afloat even in a tough economy. Here are some ideas.
4 Cost Management Techniques for Small Businesses
1. Minimize overhead
One of the quickest ways to get in over your head financially is with exorbitant overhead costs. This can especially be a problem for brick and mortar businesses paying for rent, energy bills, and inventory space. If overhead costs are eating away your profit, you should brainstorm some ideas to cut back. With e-commerce sales steadily rising, many businesses are doing away with brick and mortar stores altogether and strictly selling online. According to Forrester Research, online retail sales will reach nearly $250 billion in 2014. Conducting most or all your sales online can dramatically reduce costs while allowing you to reach a larger demographic at the same time.
You should also look into drop shipping if you stick with online sales. Rather than having to pay inventory storage costs, a manufacturer or wholesaler will ship products directly to the consumer. This can lead to substantially higher profit margins while improving efficiency.
If you have no choice but to remain brick and mortar, it's smart to condense your suppliers. Getting electricity and gas should minimize utility bills. Also, choosing a single company to provide Internet, telephone, and television can be helpful.
2. Capitalize on technology
The right technology can be an entrepreneur's best friend. Not only does it streamline many business operations, but it levels the playing field and allows small businesses to compete with much larger ones. There are numerous project cost management options you can implement and customize to meet the specific needs of your business.
- Customer Relationship Management (CRM) Software - This revolves around software to streamline and automate areas such as managing contacts, customer service, email, social media, and technical support. By keeping things organized and spotting trends, you ensure that your business is equipped to keep customers happy while increasing productivity. Considered checking out Trigger, Business.org's top-rated, budget-friendly CRM and project cost management option.
- Enterprise Resource Planning (ERP) Systems - Using this type of technology helps you create a solid infrastructure while maintaining steady operations. This often covers the financial/accounting side of business, sales, inventory control, and customer service. There are even vendors like Exact Globe and NetSuite that are specifically designed for small businesses.
- Cloud Apps - Cloud computing has become an increasingly popular option for businesses because of its safety, security, scalability, and convenience. While the term cloud computing can encompass numerous processes, cloud apps like Google Drive, Evernote and Dropbox are simple solutions for small businesses. They allow you to create and store documents, spreadsheets, slideshows, images, and other items with ease. Rather than backing them up on traditional hardware devices like disks and USB sticks, everything is securely saved in the cloud, where it can be accessed on a variety of devices from anywhere in the world with Internet access.
3. Train employees on efficient time management
Keeping employees on track throughout daily operations is another way to keep down costs. Without efficient time management, team members can easily become sidetracked, and you wind up paying for manpower that isn't getting results. That's why it's important to assign each employee appropriate tasks that match their ability. Having a good project manager to carefully monitor the progress of each project should help you get the maximum productivity from each team member. You may even want to use time tracking or a top-rated time management software to make it easier.
4. Outsource projects globally
This is another of the cost management techniques that's become possible, in part, thanks to the Internet. If you have certain tasks that don't require employees to work in-house, outsourcing projects to workers around the country or even the world can be a lifesaver. Not only can this save money, it gives you access to some of the brightest talent there is. Platforms like Skype and Google+ Hangouts offer face-to-face interaction to provide effective communication.
While small businesses don't always have the deep pockets of larger businesses, it doesn't mean they can't thrive. Being smart and optimizing your business's efficiency can quickly elevate you above competitors who use outdated techniques. By cutting your costs, you can drive larger profits while building a strong foundation for the future.