Five ways to reduce your expenses
Economize – while keeping growth in mind – with these tips
Regardless of the industry you’re in, rising costs are likely a constant challenge. That being the case, where should you spend, and where should you cut back? We asked Louisa Horne, Director, Small Business of BDC Advisory Services, to share her top tips for reining in expenses and having your dollars go further.
1. Ask for help
“Financial management, strategic planning, HR, sales and marketing... you can’t possibly be an expert in all of those things, and that’s okay,” says Horne, who advises at the only bank in Canada devoted exclusively to entrepreneurs. “But as a small-business owner, you do need to have a certain level of knowledge around well-informed decision-making and knowing that there will be some things you will need to have somebody else do for you.”
2. Understand how productive your business is
BDC offers a free productivity-benchmarking tool – available at bdc.ca/productivity – that gives entrepreneurs a sense of where they stand compared to other Canadian businesses in their sector. Horne says the tool can help business owners better assess where to cut costs and where to spend more.
3. Focus your spending on your profitable products and services
“It’s absolutely essential for entrepreneurs to have good financial literacy, which means they’ve got to be able to read their numbers,” advises Horne. This will allow business owners to determine which products or services are earning their keep, and which ones are delivering the least ROI.
4. Be strategic about your spending
Businesses encounter all kinds of costs, and smart entrepreneurs create budgets that anticipate them. “What we see is that a lot of small-business owners make ad hoc or random decisions on the fly, spending money in areas that don’t help them meet their objectives,” says Horne. Instead, think about how to attract the right customers – or how to retain them. Have a plan, have a budget and have the key performance indicators in place to spend wisely where it’s most appropriate.
5. Explore cost-saving technology
The way the world does business is changing, and there may be technology tools that can improve the efficiency and effectiveness of your business. “A couple of years ago, you wouldn’t have even thought about these technologies,” says Horne. This could be as simple as using digital communication tools to reduce postage, using GPS to optimize your shipping routes, investing in cloud-based apps to streamline your operations, or saving on outdated phone systems by going fully mobile.
Whatever you decide to do, think long term. “Business owners may say, ‘Okay, we’re going to cut the marketing budget or we’re going to cut some people’,” says Horne, “but it might put them in a spiral that limits their ability to grow and get out of the [financial] situation they’re in.”