12 Tips to Manage Your Business Costs
The revenue you have coming in and the expenses you have going out are the two key variables that will decide the profitability of your company. Your company will continue to run efficiently if you can keep control of these two variables. There are, however, numerous other factors to consider. It’s possible that if you don’t handle them correctly, your business will collapse. Here are some suggestions for managing big business expenditures that affect all forms of businesses.
When most people think about budgeting, the first thing that comes to mind is cutting costs as much as possible. It’s an excellent technique. Every dollar you save on spending (while keeping the same quality and operations) is a dollar of profit added to your bottom line.
Sometimes, however, managing expenses entails taking on more costs, as long as they are worthwhile to you. For example, if a new marketing campaign promises to generate new sales, you could invest more money in it.
Here are some of the big types of expenditures you’ll encounter and how you can better handle them:
1. Office Equipment and Utilities
The ongoing monthly costs of running a company will eat into your finances. Water, electricity, gas, internet, and basic office supplies such as pencils, pens, and paper all need to be planned for. Reduce power costs by “going green” and adding an efficient solar power system. In addition, provide strict guidelines for how and when utilities are used, such as requiring that all electronics be switched off and unplugged at the end of the night. You could go paperless and keep your office clutter-free if you really wanted to cut your office costs to the bone.
2. Wages and Benefits
Your company will not survive long if you do not have a team of workers. If you’re just getting started, you’ll need to figure out who will be on your team and what tasks they’ll be responsible for first. You can measure the going rate for each position you want to recruit using Glassdoor or a similar salary index. Calculate how much you’ll have to pay in benefits. This could be anything from zero to tens of thousands of dollars a year. Keep the costs down by just hiring the staff you need to complete the task. To cover everything else, use independent contractors and other part-time support.
3. Property Costs
This would be the most stable expense, aside from staffing costs. If you bought a house outright, you’d have to pay a mortgage payment as well as property taxes. You’ll usually pay a flat rate if you’re renting. Depending on your place, even a small business can expect to pay several hundred to several thousand dollars per month in rent. Keep your industrial room small and far away from densely populated areas, or consider subleasing it.
4. Required Tools
If it’s a multimillion-dollar manufacturing piece or a simple copier/printer, the company would almost certainly need equipment. That means investing at least a few hundred dollars in the beginning. Save money by looking for devices that combine different functions into a single kit or by purchasing used rather than new equipment. Make sure you’re aware of the used equipment’s reduced lifespan and/or efficiency.
5. Advertisement and Marketing
You’ll need to invest in marketing and advertisement if you want your company to create more leads, interest, and brand awareness. Not all tactics, however, are created equal. You can save money by concentrating on the tactics that are most likely to have a high return on investment (ROI) or that work particularly well in your industry. Experimentation, interviews with other business owners, and testing may take some time to find these candidates. However, if it means having a better deal and a higher return, it’s worth the investment.
6. Theft Reduction
You must accept the possibility that your business may be targeted by criminals, either internal or external. You should also be mindful of the dangers that cyberattacks pose to small businesses. It just takes one hacked password to bring the business to its knees. As a result, you’ll need to spend at least some money on better protection. Fortunately, modern camera systems are relatively inexpensive. In addition, safeguarding your digital footprint is as easy as better training and keeping your employees’ apps up to date, both of which are completely free.
If you own something on behalf of the company, such as a home, appliances, or personal devices such as laptops, you’ll need to budget for repairs and maintenance. As compared to the cost of major repairs and replacements, preventative maintenance and preventive repairs are usually insignificant. Find a trustworthy contact for each group who can manage these routine tasks.
8. Other Monetary Losses
Suits, natural disasters, and unexpected changes can all put a stop to your profits. There are several different forms of company insurance. Obtain any regulation that can shield the company from a real attack. You can, however, lower your prices by purchasing all of your plans from the same company and committing to better long-term practices.
9. Professional Fees
While some entrepreneurs enjoy the concept of doing it themselves, there are some places where inexperienced entrepreneurs can do more harm than good. It’s best to hire someone who knows what they’re doing when it comes to law, taxation, or other complex disciplines. That means you’ll have to pay a high hourly rate or a retainer fee. Fortunately, with a little research, you should be able to find someone affordable in each field who you can rely on for sound advice. Begin by asking other local business owners who they use and why, and then conduct interviews with them to learn more about their experiences.
10. Professional Affiliations
You may be expected to pay professional membership or organization fees depending on your industry. You might risk being pushed out of the business if you don’t. You may be required to pay a fee to become accredited in a specific discipline or to pay a monthly fee to be a member of a registry or database. Fees vary from the tiniest to the most egregious. Unfortunately, unless you choose to work outside of those defined guidelines and group operations, there isn’t anything you can do to reduce those costs.
11. Preparation of Tax Returns
Income tax, estimated taxes, self-employment taxes, withheld taxes, and excise taxes are only a few of the many types of business taxes. These costs will catch you off guard if you aren’t expecting them. You could even end up in legal trouble if you don’t pay them properly.
12. Travel, Dining, and Entertainment
Finally, if your business requires you to travel around the country to meet with customers, pitch your company, or hire talented people, you will have substantial travel, eating, and entertainment expenses. If you or your employees fly to other countries, take customers out to dinner, or even discuss business at sporting events, you’ll need to reimburse yourself or your employees. It’s difficult to keep costs down here. You’ll need to cut back on expensive client dinners and replace those in-person meetings with video calls. It could be worthwhile if it saves you hundreds of dollars per month. This is highly dependent on the industry, target market, and the amount of money your company can afford to invest.