7 Amazing Ways to Cut Costs For Your Business
Would you like to cut costs for your business to enjoy more profits? What saving more costs mean to you? Maybe you can increase your salary for yourself as the business owner, so you can have more buying power to get anything you want. Or maybe you can invest in another opportunity to strive for more income. Or maybe you can have more cash flow to smooth out the operation. Either way, it’s pretty amazing, right?
That’s why I’m going to show you 7 amazing ways to cut costs for your business. These are the proven ways we learned after working with more than 250 small and medium businesses in Malaysia. By implementing them, you could easily save 10 - 30% of your overhead costs.
We achieve that by looking for a cheaper alternative option to get the same results. Why spend more when you can get the same results at a lower cost? If you agree with me, then you have to pay attention to what I’m going to share now.
So let’s get started.
1. Cut Costs By Reducing Purchase and Supply Costs
Maybe you already know this but I have to address this in case someone doesn’t know about it. This is very crucial because purchase costs represent a significant cost to a business. It can be purchasing products to resell which has a direct impact on the gross profit of a business. Or it can be purchasing equipment and office supplies for operations that will impact the net profit.
In order to cut costs, you’ll always want to look for the wholesaler, if not the manufacturer. The last person you want to buy from is the retailer.
The answer is simple. When the products reach the retailers, it has incurred many costs like transport, insurance, and the profit markup from the seller. And the retailers will need to include their profit as well. So you may get a product at price 100 - 200% higher than the cost.
In fact, many manufacturers and wholesalers are looking to serve end-users directly. Thanks to the rise of digital marketing and eCommerce platforms (Lazada, Amazon, etc), they can now market their products online. So you’re probably just one search away from getting the original price of the product. And if you’re buying in bulk, you can negotiate a discount price with them.
By securing a lower purchase cost, you have more flexibility in your strategy. For example, you can penetrate the market by offering a price your competitors can’t.
2. Cut Marketing And Advertising Costs
Marketing is important to generate revenue, how could we cut it? Well. I mean if you’re still using old-school marketing and advertising methods… Cut it!
There are more potential customers online than ever before, especially after Covid-19. According to Statista, 30% of respondents in Malaysia purchase online several times a month. And this is not limited to young people only. As a result, advertising does not have to be expensive.
We have seen many companies are still advertising in newspapers. To be honest, that’s very cost-ineffective. It costs about RM 700 a day for a job posting. You might have said, “That’s not a lot though”. But imagine spending RM 700 on Facebook ads could get you 2 - 20 new customers (depends on your industry). I’m not bragging. Digital marketing is far far more effective than any traditional advertising and marketing method.
Here’s how it works.
You can start by building an online presence by creating a website. Then you can do Facebook ads, Google ads, SEO, email marketing, social media marketing, Youtube, etc to drive traffic to it. This will help you to cut costs and at the same time get you a much better return on investment than using traditional methods.
Do you want to know the little known secret to make things even better? That’s by hiring a copywriter to handle the marketing for you. If you don’t know what a copywriter is, it’s a person who turns words into revenue.
A copywriter can help you boost the return on investment significantly. In fact, there are many influencers and business owners in the US and Canada earning 7 - 9 figures in a short time after hiring copywriters.
In fact, we are hiring copywriters to manage our marketing. You can talk to one of them here if you’re interested to get one.
3. Cut Costs by Outsourcing
With the convenience of the Internet, outsourcing has never been easier. Decades ago we used fax, email and telephone to communicate… Now you can communicate with someone easily by Whatsapp, Zoom, Linkedin, etc. It’s quick and efficient.
So, outsourcing has become another trend, especially for small business owners to save a huge amount of costs. For example, imagine you can outsource accounting services at a price as low as RM297 a month instead of hiring a full-time accountant that costs you from RM2,300 - RM5,000.
Following the growth of the freelancing economy, now you can outsource pretty much everything like marketing, business logo design, graphic design, logistics, etc. You can find a lot of freelancers at Fiverr and Upwork who can do professional work at a price far cheaper than the local suppliers. But you have to be careful when hiring these freelancers because not every one of them is competent. You can find some really good ones if you select carefully.
4. Control Payroll Costs
I’m not talking about cutting salary or bonus. I’m talking about employee retention. It’s always more cost-effective to retain an employee than hiring a new one.
Because with the same level of expertise, the starting salary of a new employee will be higher than the salary of the existing employee. For example, a small audit firm hires a fresh graduate at a starting salary of RM2,800. With a yearly increment of RM300, the audit firm pays only RM4,300 for an auditor with 5 years of experience. But it costs RM5,000 - RM6,000 to hire a new one. The same goes for other industries as well.
Besides, every time a staff leaves, they take with them all the experience and expertise gained from working with you. You can't get to recoup any of the investments it made in training that staff – all of that only benefits the next company. Plus, you need to train the new staff all over again and it takes time for them to learn and reach the same productivity level as the previous one.
It may be a challenge for SMEs to retain employees, but it’s worthwhile to do so if you wish to cut costs.
On the other hand, it’s vital to lay off those underperformed, idle staff or those roles that can be replaced with technology. We don’t pay for someone to chit chat or scrolling Facebook in the office.
For example, if your business is not too big, you don’t actually need an accounting staff. Most of the time the accounting staff is doing unproductive things. So you can look to outsource the accounting services which is much cheaper (and sometimes more professional) than hiring full-time.
However, be careful of labour law while you fire people. It could cost you a lot if done improperly.
5. Make Good Use of Virtual Technology to Cut Costs
Does your business really need a physical office? For some businesses like E-commerce, home business, online business and even some small businesses don’t actually need a physical office. There are many beautiful and comfortable virtual offices available around Malaysia so you can host meetings, receive business letters or have a receptionist to pick up calls. You can find a handful of them just by Google search.
Besides, I believe many people are now familiar with Zoom meetings due to the new normal (work-from-home). This is a useful tool that eliminates the need for a physical meeting room and also saves traveling expenses. This is a big savior for businesses that need to have meetings with overseas branches, suppliers and clients frequently.
And we have Google Drive, Google Docs, etc that allows us to store files easily. So you don’t need to rent a store just to keep documents.
6. Focus On What You Good At
Many business owners swap time in an effort to cut costs. In fact, some of our clients tried to do accounting on their own which they don’t enjoy. And it ends up paying heavy tax penalties due to inaccurate and inappropriate accounts. It just isn't worth it.
It's important to know the value of your time and make sure you're using it efficiently. For example, it’s ridiculous for you to drive an hour sending documents because you want to save the RM20 on the courier. If you’re doing it, you're saying your time is worth less than RM20 an hour, not to mention the fuel cost on your car.
In fact, those successful rich entrepreneurs only focus on what they are best at. Then they delegate and outsource the others. If you’re familiar with the saying, “Stop wasting my time, I earn thousands in seconds”, it's true. It means they value their time very much.
Efficiency leads to more productivity and profit. It’s important for you to know your goals, being organized, and having a plan. Trying to do everything on your own will drain you out quickly, and you might end up doing nothing on the next day.
7. Maximize Tax-Saving
Why pay more when you can save more in tax? Unless you love the government very much and wish to be like the guy who donated RM26 billion to the PM. But you're here because you want to cut costs, aren't you?
So how can you maximize tax-saving? It’s actually very simple.
You just have to build a habit of keeping track of all business expenses by saving receipts. Don’t be surprised to know that many business owners overlooked this part. They either lost it or threw the invoices and receipts. Imagine how much tax deductions they have thrown away.
There are many more tax-saving tips and tricks which I’m not convenient to share here. If you’re interested in saving more tax, feel free to book a call with us.
To conclude, the 7 amazing ways to cut costs for your business are:
Cut costs by reducing purchase and supply costs
Cut marketing and advertising costs
Cut costs by outsourcing
Control payroll costs
Make good use of virtual technology
Focus on what you good at
Start implementing these strategies today so you can enjoy more profits for the year. If you’re interested in outsourcing accounting services to save costs, feel free to book a call with us.