While the likes of Apple, Microsoft, and Amazon can plough millions if not billions into the company without worry, the same can’t be said for small businesses.
For most business owners, balancing investment with cost-cutting is the key to growth.
In most cases where a small business fails, the issue can be traced to spending exceeding revenue. In this article, we highlight three areas where small businesses consistently overspend.
Overstaffing
If you want to scale a business, you’re probably going to need to build a team and then expand it. For a lot of businesses, staff wages are the highest cost, but this isn’t an excuse for overspending on staff. If you do think your business is overspending on staff costs, this doesn’t mean the solution lies in slashing salaries, as this will simply upset staff and create additional problems.
Instead, try to identify areas where you have more staff than you need. Most business owners probably assume that their business has the correct level of staff, but it’s important to consider other alternatives that may not be obvious at first. For example, can a certain task be outsourced to save money? Take the role of a receptionist. While it may be important that your business has someone who can answer the phone in a professional manner, this individual may also be spending a large part of their day waiting for the phone to ring, which is a complete waste of money from the business’s perspective.
An alternative in this case would be to explore outsourcing this task to a business that provides professional phone answering services. Companies like Posh offer virtual receptionist services, where businesses pay only for the time their dedicated receptionist spends on the phone. This is a great example of how businesses can cut costs while maintaining, or even improving, the service they offer.
Rent
For years, businesses needed a physical space where their team could operate from. But with advancements in technology, businesses can now operate remotely and communicate digitally. This includes communication between internal team members and meetings with external clients. In summary, unless a business is operating in a certain type of industry, there isn’t much need for a physical office space in this day and age.
This is an obvious area where businesses can cut costs, though it comes with its own challenges. Maintaining company culture through video calls and digital communication can be difficult, and it also means you must place a lot of trust in staff to work productively from a remote location. However, if you’re able to perfect this, the financial rewards are huge as an office space in a city centre location can be extremely expensive. It’s also worth considering other advantages, such as hiring staff from around the world and offering more attractive work-life packages to potential employees.
Ineffective Marketing
If staffing costs or rent aren’t your business’s highest cost, it’s likely to be marketing. Whether it’s working with a marketing agency, paying for marketing software and pumping money into advertisements, most businesses will spend on marketing in one way or another.
But if your marketing efforts aren’t turning into leads or sales, you’re wasting money. And for nearly all businesses, there will be room to improve ROI. This can be the hardest cost to get right, but if you are able to identify marketing channels that are working or not working, it won’t just help you cut costs; it will also help you increase sales, leads, revenue, and profit.
