By Rory Whelan
Unless your business is an unstoppable goliath like Snapchat or Netflix, survival is all about one thing: profitability. Making money is your ticket to continued success — but doing so isn’t always easy. 2018 has already seen some turbulent financial weather, and with Brexit still on the cards while disposable income falls, SMEs in the UK face collapse if they don’t start making smart decisions with their cash.
Making a profit isn’t just about selling the most services or products — it’s also about keeping operating costs down so that sales have a greater impact on financial growth. But how can you achieve this? Here are a few simple methods any business can employ to drive down operating costs and bring up the balance between income and outgoings:
‘Hire’ Software and Smart Technology
There are plenty of jobs that need doing, but that you don’t have time to do. These include basic administration tasks, such as data-entry or managing the phone lines. As a result, SMEs often hire staff they cannot properly utilise and at a high-cost, simply to ensure these tasks get completed. Fortunately, in a world where automation is on the rise, smart technology now exists to help manage such tasks.
A receptionist is a valued part of any SME’s roster; they ensure vital, lead-generating phone calls are always answered. However, the average receptionist commands a salary of £18,000 a year — a high cost for any SME to pay. However, this expense is unnecessary as technology now exists to take on the role.
Virtual receptionists are automated systems that allow for everything from call forwarding and scheduling to greetings and message dictation. This kind of tech will cost your business annual fees in the low hundreds, establishing massive savings and boosting overall profitability, while still allowing you to benefit from similar levels of work output and task management.
Similar tech is being used to fulfil a number of different business tasks, from using virtual assistants, like Amazon’s Alexa, to manage meetings and order supplies, to using drones to stock-check warehouses.
Perform Expense Analysis
Overpaying for supplies and resources is an alarmingly common trend in UK business. Over 65% are thought to overpay for energy, while in 2017 it was reported that nearly £9 billion was spent unnecessarily by British SMEs. Perhaps more shockingly, only 1 in 5 business owners are actually properly tracking their expenses.
Clearly, mismanagement of expenses is rife in the small business community and it’s hitting profit margins harder than you might think. So what is the solution? Awareness.
Much of the overspending problem comes down to sheer ignorance of the problem. When you have a business to run, customers to keep happy and staff to manage, watching your outgoings is difficult. However, the profit losses are significant enough to warrant a greater level of attention.
The easiest way of slashing operating costs is by implementing a regular supplier and expense analysis. Set a schedule to routinely evaluate your outgoing payments and determine whether or not you are paying appropriate fees — or if you are being overcharged. These practices allow you to make any necessary changes, such as switching suppliers or negotiating new deals.
Consider Going Remote
Remote working is a trend that is increasingly popular amongst the British workforce. Its demand stems from flexibility and modern life practicalities for staff, but in reality, the biggest benefits can actually be seen by employers.
Operating your typical office or work headquarters is incredibly costly. When you take into account leases, bills, food and other staff expenses, and maintenance and upkeep, the fees really start to wrack up. We’re talking thousands of pounds in profitability lost to business premise and daily operation.
Shifting to a remote work environment has become far easier in recent years, thanks to an inundation of cloud-based technology that enables everything from connective working and communication to task-setting and time management. Businesses in almost every sector are now capable of taking their platform remote, saving huge amounts on operating costs.
Of course, not all workplaces can go completely remote. Warehouses, construction companies, mechanics and local shops all require a physical presence. However, there are still opportunities to reduce costs here. While you might not be able to move all of your team to a remote working environment, you may be able to move a fraction; such as your sales, administration and HR teams, enabling you to relocate to a cheaper property.
Evaluate your business on its unique operating processes and establish how you can implement remote working to cut costs.
Change Your Marketing Strategy
Old-fashioned interruptive advertising, such as print ads or flyer campaigns, can be exceptionally expensive processes, often costing hundreds and even thousands of pounds. This investment is worth the price if you are getting an appropriate return, but are you?
The digital age has expanded marketing opportunities to the online platform, and done so in a big way. SMEs are now presented with numerous different options for gaining exposure for their brand, from social media posts and Google ads to sponsored publicity and search engine optimisation. Exploring digital marketing techniques and establishing the most effective way of promoting your business can help you save on overall costs.
All businesses are different — each has its own unique sales point and personal voice. What works for you may not work for another brand — and vice-versa. Simply following competitor trends and standard practice is not the secret to optimising costs. Are you sinking money on social media posting for next to zero ROI? Ditch the practice and run Google ads. Google ads not getting clicks? Maybe your profits lie in organic traffic.
You don’t just have to use new-age methods, though. Experiment with all marketing strategies available to you. Publicising at local events may be your best and cheapest option. The goal, as with all other methods of cost-cutting on this list, is to strike the perfect balance. Find the most effective method based on investment and return and boost your overall profitability while reducing the cost of the sale.