Small business play a large role in the US economy.
According to Small Business Administration, since 1995, small to medium-sized business have generated almost two thirds – 64% if you want to be exact – of new jobs in the United States. Furthermore, they’ve also paid 44% of the total US private payroll.
So whether a new business succeeds or fails is actually pretty important. However, the reality is, more often than, a small business will crash and fail within the first couple of years. As a matter of fact, according to statistics provided by Inc.com, only 4 out of 100 business survive past the first decade.
The question now is – what can you do to become one of the 4%?
Why So Many Business Fail?
Luckily, small business performance has been studied for quite a while now from a variety of approaches, so it’s not that hard to understand why some organizations fail and why others succeed. According to Dun & Bradstreet, 89% of business fail because of simple managing mistakes, such as:
- Poor Business Planning
- Lack of Industry Experience
- Small Customer Base
- Disregarding the Competition
- Lack of Financial Awareness
Unsurprisingly, a majority of new organizations fails due to lack of financial responsibility. And it’s not just a matter of unavailability of funding – far from it actually –the fact is, most people don’t look to cut any corners financially and end up with an empty account in just a matter of months.
How Can You Save Some Money?
While some try to focus on increasing sales and expanding their customer base, when you’re trying to achieve profitability, trying to lower your expenses as much as possible is really a smarter thing to do.
Since you can’t force your customers to spend more money on your products/services, therefore, you should focus on trimming the unnecessary costs first. The tricky part here is knowing which costs are safe to trim and which are not.
So let’s take a quick look at a couple of things you can do to cut your costs, without obstructing any business-critical activities or affecting your organization’s ability to grow.
Four Things You Can do to Cut Your Costs:
1. Encourage Telecommuting as Much as Possible
Telecommuting – or working from the comfort of your home – is becoming more and more popular in today’s economy.
According to data collected by Global Workplace Analytics, more than 3.3 million full-time professionals in the US, excluding self-employed workers and volunteers, consider their home as their primary place of work.
Since it involves purchasing and learning how to use new software, telecommuting may seem like too much hassle for a number of small business owners. However, you have to be aware that telecommuting has a number of advantages for your business.
For example, recent studies have demonstrated that telecommuting often results in more productive, physically and mentally healthier workforce. And as you probably assume, it can actually save you ton of money.
According to Telework Research Network, your company could actually save more than $6,500 per employee, per year, if you start allowing your employees to work from home.
2. Start Using Space More Efficiently
For decades at this point, businessmen all across the world have been working on making their offices more efficient. According to data from CCIM, on average, office lease today has just around 185 square feet of dedicated space per employee.
That’s actually more than 20% less space business owners leased just 15 years ago. And the trend may even accelerate. According to the same study, a vast majority of US executives plans to lease less than 100 square feet of dedicated office space per employee by next year.
Fortunately, everything from increased smartphone usage to collaborative work stations can help you save some money on lease. For example, multipurpose areas – like break rooms that double as conference rooms when and if needed – are perfect for rent-conscious owners.
Office-efficient principles such as these will allow you to do more with less. And don’t worry, when your business eventually grows and you need to hire a couple of new employees, you’ll have enough money stacked to rent a new, bigger office space.
3. Invest More in Employee Retention
Speaking of growing and expanding – hiring a new employee costs more than you probably think it does – especially if you’re looking for someone with a specific skill-set or in-demand knowledge.
As Center for American Progress’ studies show, replacing an average worker, not an executive can cost you up to 20% of the worker’s yearly salary. That sounds like a lot, right? Unfortunately, some experts think that this estimate is even modest.
But let’s say that the estimate is correct; in that case, if your employee earns $50,000 annually, you’re looking at $10,000 in recruitment and training costs, if that employee leaves. And you have to admit, that’s a lot of money.
This means you have to do everything in your power to retain your current employees, even it requires spending a bit more on salaries and surprisingly, employee training.
As The Guardian reports, recent studies have shown that there’s a strong correlation between learning and employee retention. This is because employees who undertake certain learning actives are more satisfied with their positions in their organizations, in addition to being more engaged and motivated.
4. Handle Shipping and Labeling Yourself
If you’re operating an e-commerce website, then you probably know that shipping is one of the less glamorous aspects of any business. It’s time-consuming, mind-numbing and it’s getting more expensive – just last year we’ve seen shipping cost increases from UPS and FedEx.
And when your customers expect shipping to be either extremely cheap or completely free, all of these costs and charges only increase. But there are certain things you can do to cut costs on shipping.
For instance, if you start using shipping software such as ShippingEasy, you’ll have a postage balance that can be refilled by your credit card. You’ll also receive certain cash-back rewards and frequent-flyer miles, and after just a couple of months, you’ll have enough points to make an extra return from your shipping costs.
You can also get a Dymo Rhino label printer, which doesn’t require any ink, so you won’t have to spend a ton of money on overpriced toner and ink supplies to print proper shipping labels.
So there you have it, those are just a couple of ways you can save some money, however, you have to be aware that every business is different. So if you’re operating a micro business from a home office, you can’t really downsize it or encourage your employees to work from home.
But it’s certain that your business ledger have some financial fat to trim. So even if you think that you can’t cut anymore financial corners, it’s definitely worth your while to take another look and reassess your situation.
It won’t cost you a dime and it could potentially produce a significant payoff down the line.