5 Ways to Save Your Small Business Big Money

Running a small business is no cheap undertaking. With less established funding and revenue than large-scale companies, a small business must often make do with very little.

If you are looking for a few ways to cut back and save money for your small business, here are five tips to get you started.

1. Implement Zero-Based Budgeting

Zero-based budgeting (ZBB) is a method where every expense must be justified for each new period, starting from a "zero base." Instead of carrying over previous budgets and making incremental adjustments, the budget is built from scratch, with each item evaluated for its necessity and cost-effectiveness.

How It Works

Example: A marketing agency might traditionally allocate $10,000 per month for digital advertising based on the previous year's budget. With ZBB, the agency starts from zero and must justify the need for every dollar spent on advertising, analyzing past performance metrics, ROI, and current market conditions.

Benefits and Cost Reduction

1. Eliminates Waste: By justifying each expense, businesses can identify and eliminate unnecessary spending. For instance, if certain marketing campaigns aren't yielding results, they can be scaled back or replaced with more effective strategies.
2. Encourages Strategic Allocation: Resources are allocated based on current needs and strategic priorities rather than historical spending patterns. This approach ensures that funds are directed to areas with the highest potential for return.
3. Enhances Accountability: Departments must defend their budget requests, fostering a culture of accountability and financial discipline. This scrutiny often reveals redundancies and inefficiencies that can be cut.

To implement ZBB, businesses should:

• Train Staff: Teach employees about the ZBB process and its benefits.
• Review Expenses: Examine all expenses and categorize them based on necessity and impact on business goals.
• Prioritize Needs: Allocate funds to the most critical areas while cutting or eliminating less essential expenditures.

2. Barter Services with Other Businesses

Bartering involves trading goods or services with other businesses without using cash. This can be a highly effective way to reduce costs, especially for small businesses that may have limited cash flow.

How It Works

Example: A graphic design firm might need legal advice but lacks the budget to hire a lawyer. Meanwhile, a law firm requires new marketing materials. The two businesses agree to exchange services: the graphic design firm creates marketing materials for the law firm, and in return, the law firm provides legal counsel.

Benefits and Cost Reduction

1. Preserves Cash: Bartering allows businesses to obtain necessary services or products without spending cash, freeing up funds for other critical expenses.
2. Use Idle Capacity: Businesses can make use of underutilized resources or downtime. For example, if the graphic design firm has staff with available hours, bartering fills those hours productively.
3. Builds Relationships: Bartering fosters strong business relationships and networks, which can lead to future collaborations and referrals.

To implement bartering:

• Network: Connect with other businesses through local business associations, networking events, or online platforms like BizX or Bartercard.
• Negotiate Terms: Clearly define the terms of the barter, including the scope of work, timelines, and mutual expectations to ensure a fair and beneficial exchange.

3. Use Open-Source Software Instead of Paid Versions

Open-source software (OSS) is software with source code that anyone can inspect, modify, and enhance. Many open-source applications are available for free, offering alternatives to costly proprietary software.

How It Works

Example: A small business using Microsoft Office Suite could switch to LibreOffice, an open-source office suite that provides similar functionality without the licensing fees.

Benefits and Cost Reduction

1. Eliminates Licensing Fees: Open-source software is typically free, reducing or eliminating the cost associated with purchasing and renewing software licenses.
2. Flexibility and Customization: Open-source software can be customized to meet specific business needs, which may not be possible with proprietary software.
3. Community Support: OSS often has robust communities of users and developers who provide support, updates, and enhancements.

To implement OSS:

• Assess Needs: Identify the software applications your business uses and explore open-source alternatives. Examples include GIMP for image editing (instead of Adobe Photoshop) and Thunderbird for email (instead of Microsoft Outlook).
• Test Solutions: Pilot the open-source software to ensure it meets your business requirements.
• Train Employees: Provide training to staff on the new software to ensure a smooth transition.

4. Cancel Unused Subscriptions

Many businesses subscribe to services and forget to cancel them when they are no longer needed. Regularly reviewing and canceling unused subscriptions can result in significant savings.

How It Works

Example: A company subscribes to multiple online tools for project management, each costing $50 per month. Over time, they realize that they only use one tool consistently. Canceling the unused subscriptions can save $100 per month or $1,200 annually.

Benefits and Cost Reduction

1. Direct Savings: Canceling unnecessary subscriptions directly reduces expenses.
2. Streamlined Operations: Reducing the number of tools and services used can streamline business operations and improve efficiency.
3. Improved Financial Awareness: Regularly reviewing subscriptions fosters a habit of financial vigilance and awareness.

To cancel unused subscriptions:

• Audit Subscriptions: Conduct a thorough audit of all subscriptions and services your business is paying for.
• Evaluate Usage: Assess which subscriptions are actively used and which ones are redundant or unnecessary.
• Cancel or Consolidate: Cancel unused subscriptions and consider consolidating services where possible. For example, if one tool offers multiple functionalities, it might replace several single-purpose tools.

5. Implement a Four-Day Workweek

A four-day workweek involves employees working four days a week instead of the traditional five, without a reduction in pay. This approach can lead to cost savings through increased productivity and reduced operational costs.

How It Works

Example: A marketing firm transitions to a four-day workweek. Employees work 10 hours per day instead of 8, maintaining the same number of weekly hours. The office is closed one additional day per week, reducing energy consumption and operational costs.

Benefits and Cost Reduction

1. Increased Productivity: Studies have shown that a shorter workweek can boost employee productivity and morale, leading to higher output in fewer hours.
2. Reduced Operational Costs: Closing the office one additional day per week can save on utilities, maintenance, and other overhead costs.
3. Improved Work-Life Balance: Employees benefit from an improved work-life balance, which can reduce turnover and associated hiring costs.

To implement a four-day workweek:

• Explain the Benefits to Others: Clearly communicate the changes to employees and stakeholders, outlining the benefits and addressing any concerns.
• Adjust Schedules: Create a schedule that ensures business operations continue smoothly. This might involve staggered workdays or longer hours on working days.
• Monitor and Adjust: Regularly monitor the impact on productivity and costs, and be prepared to make adjustments as needed.