In this article, ten seasoned CEOs and directors share their invaluable insights on how to successfully reduce expenses in small businesses without compromising the quality of products or services. From the importance of an annual review of vendor contracts to the innovative approach of utilizing your staff’s hidden talents, these leaders provide a wealth of practical tips and specific examples. Dive in to discover their strategies.
- Annually Review Vendor Contracts
- Implement a Smart Outsourcing Strategy
- Optimize Talent with Freelancers
- Adopt Agile for Workflow Optimization
- Refine Cloud-Resource Management
- Freeze SaaS and Travel Expenses
- Leverage Automation in Operations
- Negotiate Win-Win Supplier Deals
- Bulk Source with Conditional Scaling
- Utilize Your Staff’s Hidden Talents
Annually Review Vendor Contracts
Hands down, the most neglected area, and probably the one with the highest savings potential in any company, is vendor management and procurement. Especially with small businesses, it’s very easy to negotiate a contract when getting started in order to quickly fill a need and forget about it because it’s a small dollar amount.
However, many of these have increase clauses built in, which often pass unnoticed and lead to unnecessary overpaying. What we do to tackle this is have an annual review of all contracts. This means a face-to-face meeting with each vendor/supplier where we reassess the need for the service, renegotiate terms, and often also retender to ensure that we are getting the most competitive deal. It can be a painful exercise, but the savings are considerable and it’s an easy way to reduce/control expenses.
Director, Skirtings R Us
Implement a Smart Outsourcing Strategy
In my small business, implementing a “Smart Outsourcing Strategy” was a game-changer. We identified non-core functions that could be outsourced to specialized service providers, such as customer support and IT maintenance.
This not only reduced labor costs but also ensured high-quality services. By focusing our in-house team on core activities, we maintained product/service quality while significantly cutting expenses.
CEO, Myrtle Beach Home Buyers
Optimize Talent with Freelancers
One approach for us that’s been effective is optimizing our talent model. Specifically, we’ve cultivated a bench of top-tier, freelance creators across time zones rather than carrying full overhead with large, in-house teams.
This allows us to tap specialized experts for each client while eliminating idle capacity costs. Our full-timers focus on client strategy and management while contractors execute specific deliverables.
The key is establishing rigorous onboarding and oversight to ensure consistent quality across our distributed creator network. Through detailed briefs, samples, and deadlines, our experts deliver incredible work.
Getting the right balance of world-class, internal staff and targeted, external talent is the key. We handle rapid scaling smoothly while controlling fixed costs.
Adopt Agile for Workflow Optimization
We once encountered a steep increase in overhead costs. Rather than sacrificing our service quality, we turned our focus toward workflow optimization. We started with an internal audit, identifying inefficiencies in our processes.
We found that adopting an agile methodology streamlined our operations, increasing transparency and reducing redundancy. Furthermore, we decided to actively seek client feedback post-project, allowing us to identify areas of over-exertion. By focusing on value-driven features instead of overly broad developments, we could allocate resources more efficiently.
Lastly, we implemented regular team retrospectives, ensuring that we continually refined our processes based on real-world experiences. By focusing on these efficiencies, we not only maintained but in some areas enhanced the quality of our service while effectively cutting costs.
CEO and Founder, Startup House
Refine Cloud-Resource Management
As a leader in a SaaS company, resource optimization is crucial in delivering value without compromising the quality of our services. One successful approach involved refining our cloud-resource management.
By scrutinizing our usage patterns, we could identify and eliminate underutilized resources, which resulted in substantial cost savings. Additionally, we leveraged automation and integrated advanced tools that enhanced operational efficiencies, allowing us to manage workloads effectively without overburdening our team.
This strategy allowed us to remain lean and agile, ensuring we provide exceptional, uninterrupted services to our clients at a competitive rate.
CEO, Hiring Indicators
Freeze SaaS and Travel Expenses
When the coronavirus outbreak took over the world, and our clients slowed down sending us work, we had to cut costs. We started with the subscriptions we had to SaaS applications, public relations, and travel.
We cut almost $5,000 per month by freezing our SaaS and travel expenses, and another $1,500 in monthly public relations expenses. It helped us weather the storm and get back in the black much faster than we would have been able to do without some cost-cutting. We also realized we were paying for a few things we didn’t need anymore.
CEO, Ditto Transcripts
Leverage Automation in Operations
In the journey of managing expenses at Ignited Results, a specific strategy that proved to be a linchpin in successfully reducing costs without compromising quality was leveraging technology and automation. There was a particular instance where our manual processes were not only time intensive but also incurred additional costs in terms of human resources and potential errors.
We identified areas, especially in our marketing operations and customer service, where automation could be implemented without diminishing the quality of our interactions and offerings. By introducing chatbots for initial customer interactions and automating certain aspects of our marketing funnels, we could maintain a high-quality customer experience while significantly reducing operational costs.
This approach allowed us to allocate our human resources to areas where a personal touch was crucial, ensuring that quality was not sacrificed in pursuing cost efficiency.
CEO, Ignited Results
Negotiate Win-Win Supplier Deals
I negotiate win-win deals with our suppliers. For example, one of our top handpiece vendors offered significant bulk-order discounts if we committed to minimum purchase volumes each quarter. This lowered our per-unit cost considerably.
However, I wanted to make sure we could actually move enough inventory to hit the thresholds before agreeing. So, I approached them with a compromise. For the first two quarters, we would order at our current levels but receive a small upfront discount. If we hit certain sales targets in that period, we would then step up to the higher-volume pricing. This gave us time to confirm the additional units were viable, while still netting immediate savings. And, the supplier kept a loyal customer.
The result? We received discounts upfront while confidently forecasting enough demand volume to maximize future cost reductions. And, there was zero impact on the products or service our customers rely on.
General Manager, Dental Sky
Bulk Source with Conditional Scaling
Trimming expenses without slashing quality—that’s the Holy Grail for small businesses like DasFlow! One effective strategy we’ve deployed is bulk sourcing with conditional scaling. Sounds fancy, but here’s what it means: We negotiate with suppliers to lock in bulk rates but agree to purchase in smaller quantities initially. As our needs grow, we scale up, enjoying the benefit of bulk pricing without the upfront cost.
An example? Our high-quality performance fabric. By negotiating a tiered pricing structure with our supplier, we’ve maintained top-notch quality while reducing material costs by 15%.
The tip: Don’t shy away from negotiating flexible, tiered pricing agreements with suppliers. It allows you to manage costs more effectively without compromising quality.
Founder and CEO, dasFlow Custom Athleisure Apparel
Utilize Your Staff’s Hidden Talents
Find out what other abilities your staff have and how they want to help. For example, that allowed us to offer all new services. One of our writers also has acting and broadcast experience. So, we put them with clients for podcasts, both online and in-person, which have been a colossal hit for our clients.
Now, it’s one more service that we can offer without having to shell out big bucks for some host, actor, etc. So often, your staff has hidden talents that they want to use which can benefit the company. Finding and helping them to utilize those is good for all involved.
CEO, Websites Depot Inc.