Every year businesses set out to drive more revenue for their companies, but on the reverse side of the same coin is saving more money, too. As industries gear up for 2021, many businesses are considering ways to cut costs and rebound from the rough times of 2020 to become profitable once more. There are several cost saving ideas for companies at any stage of growth which include:
- Identifying business goals
- Reducing office expenses
- Developing a budget
- Analyzing existing business practices
- Determining areas for improvement
The actions taken in the new year should be modeled around the ideas and measures put into place during the planning phase, monitored for progress along the way, and adjusted as needed. Outlining a business plan for the upcoming year may look much different compared to years past, but provides a blueprint that can be regularly referred back to throughout the year and compared with previous metrics to see how much money has been saved and how much it’s helped the company improve.
Identifying Business Goals
Defining goals is a large undertaking because there are several that may be necessary to accomplish on a weekly or even daily basis. However, the attainable, operational items are on the agenda from week-to-week or quarter-to-quarter should fit under the umbrella of your overarching annual goals.
These may include increasing revenue or lowering costs by a certain percentage, introducing a new service or product, or improving client and employee retention. Make sure there’s a measurement attached to each goal to track its growth and see how much progress is being made toward it month after month. For example, if the goal is to reduce costs by $25,000 for the year, the next steps would be breaking this down into smaller, attainable tasks. This may involve:
- Performing an inventory of unused equipment or online-based subscriptions and removing what’s no longer used
- Reviewing services and amenities and evaluating where a less expensive option may be available
- Moving to a smaller space, putting a temporary freeze on new hires, and/or limiting unnecessary extras
For industries where growth fluctuates, work that into the yearly cost saving plan as well. For instance, summer and holiday months equal peak business for the travel industry.
Brainstorming cost reduction ideas for companies during slower months can help through times when customer activity isn’t as high. It’s a good time to take note of what’s considered essential to move the business forward and what can be eliminated or changed in order to cut unnecessary expenses for a small business owner.
Reducing Office Expenses
Office expenses are often set on a recurring delivery cycle which makes it more difficult to clearly see how much money is being spent per month or quarter for facilities or amenities your company simply may not need anymore. One of the easiest cost saving ideas for companies is reducing the amount of paper in the office, which many businesses have already implemented as a way to create a more eco-friendly workplace. The cost for printers, toner, paper, and other accessories adds up over time and is not as important in today’s digital world.
Like the reduction of paper waste in the workplace, businesses have already been making strides toward reducing plastic water bottles from companies as well. One of the key ways to accomplish this is to stop water bottle subscription services and invest in a filtered water station instead. There are several perks to this, including having on-demand, purified water for employees and visitors without the need for plastic bottles or cups. This touch-free experience reduces the spread of germs and offers the convenience of auto-replenishment so it never runs out.
Another office expense decision makers will be looking at in 2021 is the category of office amenities or perks, including office snacks, kitchen supplies, and coffee and water dispensers. In 2020, the majority of companies shifted to a remote working environment and are not set to fully return to the office space until later into 2021 if at all. This means that regular shipments of office supplies can be reduced in amount and/or frequency and can be a big area in which to cut unnecessary expenses.
From an operational standpoint, eliminate or temporarily suspend any services, subscriptions, equipment, or use of space that’s not needed going into 2021 and beyond. If you decide there’s a need for any of these things again, you can slowly introduce them as part of your quarterly or annual budget plan in the future.
Developing a Budget
One of the key parts of following through on cost reduction ideas for companies is establishing a budget to track expenses and understand which purchases benefit the business. Break it down by department or category to make it more easily manageable and see how it contributes to the overall company budget. This requires reducing costs on unused or irregularly used items and having a plan in place for any additions.
Additions may include new programs, equipment, and resources, but also new hires as well. Create a line item for each part of the budget and link it to a dollar amount to see which areas may be shifted to allocate money to the areas with higher priority. Also, consider how an investment now will save (or make) money in the long run. For example, would an investment in an automated tool free up time for employees to tackle more important matters?
Setting an annual budget is a good guideline to work from even if the year shakes things up in unexpected ways. Without having a starting point, it’s easy to quickly lose sight of expenses and what’s being spent rather than shifting budget real-time or making changes along the way that may keep a business operating more smoothly.
Analyzing Existing Business Practices
All cost saving ideas for companies link back to operations. When there’s not as much revenue coming in, where can operating costs be cut? One of the largest expenses is often space. A physical office is a large part of operational costs due to leases, utilities, furniture, and equipment. 2021 may be time to change the way you do business in terms of space, especially with many employees now working remotely. To cut down on costs in this category consider:
- Moving to a smaller space
- Co-leasing a space where two companies share the same floor but different offices
- Limit in-office employees and continue remote work as an option
As companies grow, teams expand as well, which means that need for larger space is often required. That leads to a new lease, desks, computers, and other equipment in addition to the cost of a move. In order to scale for growth, consider what the future of office work looks like for your company? Is it a hybrid model of remote and in-office employees, fully remote, or a rotating plan where employees share stations and report to the office on alternating days?
In addition to office space, another key way to save costs is canceling any unused tools or subscriptions needed for the job. Many follow an auto-renewal basis, which can lead to thousands of dollars inadvertently wasted. Everything from eliminating or reducing a cable plan to office plant deliveries can be ways to whittle away at operational costs and save money. If you don’t want to discontinue these things altogether, there may be less expensive options available.
Determining Areas for Improvement
As you analyze what is and isn’t working in your current business, you’ll uncover areas that need improvement. Inefficiency is one factor that constantly bogs down companies and wastes both time and money. Identify areas where processes can be improved for efficiency. First, directors should work with teams to ensure they’re in the right roles which allow them to contribute their best efforts to the team. This may uncover opportunities to create a new position or combine efforts in order to create a more streamlined process.
Second, use analytics as well as customer and employee feedback to drive decisions. Analytics can help you predict ebbs and flows of business between seasons where income may be limited. Additionally, conducting an annual satisfaction survey among both customers and employees can highlight areas where business is excelling and areas where improvements can be made. Inefficiencies and lack of production on the employee side reflects to customers and clients and poorly affects business. By course-correcting areas in advance, it can prevent high turnover rates and improve retention, which cuts down on costs both for gaining new clients and onboarding new employees.
Taking an in-depth look at financials is important for any business, but often the focus is set solely to how much revenue is coming in without taking into account how much is going out. By laying out specific business goals and reducing operational expenses, it can save money you may not even realize you were spending as a business owner. Additionally, developing a budget and changing the way you do business to meet the current environment will help you save costs and better prepare you for the future. Once you start looking into what’s being spent, you may find there’s more cost saving opportunities than you initially thought.