In Australia, more than two-thirds of all small businesses fail within the first 5 years. Naturally, the specifics of every situation is different, however, the overwhelming cause of failure is poor cash flow.
Even though the concept of cash flow is a fairly straightforward one, most business owners focus solely on maximising their sales, and although this is vital to building a profitable business, reducing your business’s costs are just as useful in creating a successful small business.
These are my top 3 ways to reduce your business’s costs without compromising the quality (or sales opportunities) for your business;
1. Outsource – Outsourcing specific functions of your business can have a huge cost saving. For example, the average cost of hiring and training a new employee is estimated to cost around $4,000. However, through outsourcing, you can avoid these costs as well as the time that you would otherwise spend training your new employee. Instead, you can gain access to a range of external providers who have more knowledge and skills.
2. Reduce Utility Costs – Overtime, utilities can become a massive expense for your business. However, reducing your energy usage for example by just 10% could boost your business’s profitability by more than 4%. But best of all, ‘reducing your energy usage’ does not have to mean the end of air-conditioning on a 45-degree day. Doing something as simple as swapping out incandescent bulbs to newer and more efficient fluorescent lights (LEDs) can result in an energy saving of more than 20% per year.
3. Share Your Skills – Sharing your skills, knowledge and resources with other professionals can help to avoid expensive invoices for “professional advice”. Instead, you should create a mutually beneficial relationship with other business owners to provide each other with services that individually, you could not have obtained.