Ways to lower your operating costs

While every entrepreneur dreams about growing their enterprise, limited resources – both in terms of money and time – often impede speedy growth.

Rapid expansion sounds a death knell to most promising businesses. This is because as a business grows, it demands more money and if an entrepreneur is not careful, they might find themselves at the end of their rope when all their capital dries up.

Keeping operating costs under control, therefore, is an essential skill for all business managers to learn. It is crucial to learn how to squeeze the last drop out of every thousand-shilling note, no matter how large your capital pool seems to be.

A common characteristic among most successful entrepreneurs is frugality. This trait, however, does not come easy or naturally to many. It requires practice, an extraordinary amount of self-discipline and immense organisational skills to pull off. Below are tips to help you develop your frugality into a habit and get the most bang out of every shilling that passes through your business account.

1. Learn the difference between being frugal and being cheap

Some entrepreneurs may think that they are being frugal with the company’s resources while, in reality, they are just being cheap. The difference between the two is a line that is often blurred. How do you tell the difference between frugality and cheapness?

An easy distinction is that frugality leads to efficiency, while cheapness leads to decreased productivity and more problems for the company. It can be efficient, for example, to outsource all your door-to-door delivery needs to a cheaper third party that specialises in logistics. It will be cheap, however, if you required your employees to take matatus to client meetings instead of cabs, leading to numerous delays, cancelled meetings and frustrated clients.

While cutting costs can be beneficial, it will do more harm than good if it is not done with careful consideration. Of importance to note is that businesses grow by increasing their sales, not by cutting their expenditure. In the long run, making wise budgeting solutions will mean more than rushing to save money at all costs. If you deprive critical business systems of much-needed capital, you risk slumping your growth or even registering losses.

2. Ditch the office and work from home

The coronavirus pandemic has changed our traditional notions of work; it has revealed that many jobs can efficiently be done remotely. Furthermore, we are learning that many employees actually prefer working from the comfort of their home, as it cuts down on the costly and time-consuming commute.

As the business owner, having your teamwork from home will help you avoid the costs that come with renting an office and keeping it running. Alternatively, you can adopt a hybrid practice where a lean team works in a small office while the majority of the employees send in their work from their homes.

3. Make use of free marketing channels

The days of paying a premium to advertise through select channels are over. While marketing helps you grow by attracting new clients and building your brand, it does not have to cost an arm and a leg.

Simply maintaining a social media profile, for example, also counts as marketing. On social media, you can target a specific niche audience that will interact with your brand and even gather feedback in real-time. Making sure you are visible on search engines such as Google will greatly boost your visibility. Research various free search engine optimisation strategies and employ them in your business.

4. Use free software whenever possible

Business software does not come cheap, and those usurious auto-renewing subscriptions can quickly add up to huge chunks of your recurring budget. If software poses a headache to your accountants, perhaps it is time to consider cheaper versions.

A good alternative is an open-source software. These are a set of software that, in most cases, contain the same functionalities as premium software but are provided free of charge. They are pretty decent, and in some cases are even better than the paid versions.

5. Eliminate paper

Reams of printing paper are not cheap, and neither are printers, accompanying stationery, toner and cartridges. Huge filing cabinets can also take up considerable space. Why not go paperless?

In this age of cloud computing, there is no need to store physical files in cabinets. Providing your employees with tablets will help you avoid costs and clutter associated with purchasing notebooks and notepads.

6. Split costs among businesses

A creative way of keeping business costs down is sharing resources with another business owner. You could, for instance, share one office space and split the rent. Resources such as storage, the break area and conference rooms can be shared too. Even employees such as delivery personnel and office receptionists can serve more than one business at a time.

7. Hire on passion, not experience

Hiring less experienced staff will save you money in terms of wages. As such, consider hiring staff based on their enthusiasm and passion, not industry experience. Passionate employees can always be trained in house to perform just as well if not better than expensive more experienced ones.