Costs are what affect your profits directly. For new and emerging businesses its important to keep their costs low, whilst they grow. It doesn't mean that you stop spending on marketing or growing your team, but spend efficiently.
Most common mistakes made by new business owners is to spend into setting up a fancy office, hiring lots of staff, spending aggressively on marketing campaign, etc. Whilst it may be OK, if you have investors who are looking at fast scale-up of business, but its always smart to be more cautious in your approach, especially with the current times we live in.
Some of the most common areas to optimise costs for small businesses will be :
Office Space
This is one fixed cost which tends to be a big chunk of your spending during your time of business setup. Always plan to get an office space keeping in mind the business expansion plans you have for next 1 year. Remember a big office space, is not just about higher rental costs, but also results in higher costs towards, electricity, air-conditioning, maintenance, security, etc.
Some of the questions which will help you decide on the space needed are:
-number of employees that will be working in the office ?
-will you entertain lot of visitors and clients in your office?
-do you need space for office meetings etc. ?
With the growing trend of technology, its quite convenient and in many cases more productive to have your staff work from home, in this case the space required will reduce. Also a new trend of 'shared workspaces' allows new & small businesses to have their staff work from such workspaces and cut their fixed office rentals.
Unless you have products that you need to demonstrate and showcase to your customers and clients, you don't need a big Visitor space in your office. In most cases, you can always meet clients in coffee shops or at shared workspaces, as and when you have meetings with them.
Outsourcing staff
Headcount or manpower cost is again one of the big components of any businesses costs.
Areas that you can optimise your manpower will be in admin, accounting, marketing roles, wherein you can either outsource these functions to agencies or hire freelancers on contractual basis.
For e.g.If you are building your business website, don't hire website developers on your roles, consider outsourcing the project to a website development agency or just hire a Website developer for a given project through Online apps like Fiverr.
Similarly, for accounting roles, you don't need to hire an accountant anymore, there are apps and tools e.g. ZOHO Books, which allow an individual business owner with limited accounts knowledge, to have an integrated accounting platform, which manage their Invoices, Expenses, Tax returns, and also generate financial documents, such as P&L Statement and Balance sheet. You can also consider to outsource and hire a part-time accountant only for 2 days in a month or an auditor to audit your account on project basis.
Office Equipment
Any business needs to invest into Office equipment such as PC's, Laptops, Phones, Copiers, etc. for effective functioning of staff in todays connected world.
Rather than buying all the devices look for options such as leasing of devices. There are many companies which offer leasing services of office equipment wherein you can upgrade to latest devices every year. Not only does leasing, allows you to free up a big portion of your capital and spending on depreciating assets, but also keeps you abreast with the latest technology available in the market.
If leasing doesn't suit your business requirements, consider Bring Your Own Device (BYOD), in which case the device is owned by the staff and your cost is limited to a fixed device cost allocation every year, which is reimbursed to each staff member. This gives flexibility to the staff to choose the devices such as Laptops, Mobile phones, which they like best for their individual and personal style requirements. Incase the device cost is higher than the fixed device cost as per company policy then the difference is paid for by the staff, since they own the device.
Some may argue that device ownership by the business allows them to show depreciation in the books, as also, to recover some costs at time of resale or liquidation of obsolete products, but in majority cases we realise that selling old devices is always a hassle and the business can hardly recover any significant value from such devices.
Allowing the choice of device to staff members also builds motivation and ensures they take better care of them since the devices are owned by them.
Marketing costs
A significant portion of any new business is towards Marketing costs for creating awareness for the brand & business. Gone are the days where new businesses had to release an advertisement or print flyers and distribute to get awareness for their products or brand.
With the use of technology and growth of social media amongst consumers, you can optimise costs by spending wisely into Online marketing mediums such as Social media, or Google campaigns. Such marketing investments allows businesses to spend efficiently and create campaigns for their target customers more effectively. Online marketing allows to target a specific demography, area close to business or only a certain set of customer interested in the said products at much lower costs.
Above are some of the most common cost heads in which any new and small business can optimise and cut their costs for a much better bottomline.
Get in touch with us if you are looking for advise on cutting costs for your business.
Written By - Rajnish Kautia - Managing Director - SRK ONLINE FZ LLC
About Rajnish Kautia
An industry veteran with over 25+ years of experience working with some of the biggest MNC's in the Electronics & Retail industry ventured into the Entrepreneurial world over 18 months back and established SRK ONLINE. With over 11+ years of experience in Middle East and Africa region, he has been working with Small business and new startups based in UAE and GCC region, mentoring and advising them to help setup their businesses, and grow them efficiently.