Running a small business is more challenging than ever. The pandemic has caused disruptions across the board. In fact, CNBC.com reported that 53% of small business owners aren’t expecting to run their businesses normally until next year. With establishments unable to operate like they did pre-COVID, saving money is of the utmost importance.
There are several ways to save money on an entrepreneurial scale, and here are four ways to do start:
1. Target your market’s demands
How businesses interact with their customers is much different than in the past. A small business’ short-term cash flow depends on sales, providing its customers with the goods and services they need. But with the current climate being so volatile, your customers’ current demands might not be the same in the next six months. And they may never return to normal. HBR.org explains that your best chance of saving money is to understand how different customer needs will be as the pandemic progresses and, eventually, ends.
To effectively target your market’s demands, tune into consumer habits that have changed and leverage this to transform your business model. Prioritize products that deliver the most value based on your customers’ needs at the current time, and this will have you saving more than if you invest in products and services with low demand.
2. Reduce energy costs
Keeping your brick-and-mortar store open or running an online business from home can cause electricity bills to soar. Energy costs are a significant part of any business’ overhead expenses, particularly for small businesses. Reputable financial resource AskMoney.com discusses in its money saving guides how to keep the “energy vampires” at bay. One of the most effective ways to lower energy costs is to monitor how much you use your heating and cooling systems. With winter approaching, it would be good practice to keep blinds and window curtains open to allow daylight to warm your space naturally.
Ceiling fans and blackout curtains can also be used during the summer months to reduce the need for air-conditioning. Limiting the amount you use things such as the water heater can also contribute to lowering your electricity bill. All this combined will free up some extra cash you can use to reinvest in your business, especially during the current climate when things are tough.
3. Outsource certain business functions
One of the biggest expenses in small and medium-sized businesses is manpower. As a small business, you may feel the need to have everything in-house so that it is within your control. However, most small establishments will only need a lean team to operate smoothly. Consider outsourcing certain tasks such as accounting and bookkeeping, IT management, and administrative tasks. Not only will your full-time employees be able to focus on more high-value tasks, outsourcing companies will provide you with experienced specialists used to working in these roles.
Outsourcing can also convert fixed costs into variable costs to release capital for investment elsewhere in your businesses. You will also be able to avoid large expenditures early on. It can also improve your marketability to investors as you funnel more capital into revenue-producing activities.
4. Revisit your budget on a regular basis
Budgets should be discussed on a regular basis, especially in the current climate. While it helps to have quarterly and annual budget meetings, it would be advisable to manage your business’ budget in real-time, too. This way, you reduce the risk of falling behind and encountering any problems.
For instance, you may be doing okay, and be tempted to invest in additional assets. While this could be a good move, our blog post on ‘Common Causes of Cash Flow Problems’ cautions business owners against over-investing as it’s one of the main variables that could cause you serious issues with your cash flow. By revisiting your budget again and again, you can gauge your business’ health and avoid any financial pitfalls that are more difficult to recover from later on.
For other tips and ideas on maximizing your business profit, visit the newest posts on MakeInBusiness.com today.