Do you own your own business? Then you’ll likely be aware that it is hard work, to put it lightly.
As a business owner, you must wear many hats throughout the week, ranging from inventory management and stock-taking to bookkeeping.
In addition, you need to pay staff wages, pay your creditors, ensure positive cash flow, and whatever other tasks are demanded by the nature of your business.
With all that said, running a business can be a one-way ticket to success and incredible wealth, but it also comes with a unique set of challenges.
That’s also why not all businesses always succeed – many go under after the first year of operation.
But if you’re dedicated, skilled and have a touch of luck grace you, you can grow your business into a large enterprise.
But how do you manage outgoing costs during a growth period? It can be a delicate balance.
This article will share how you can manage it.
Cut Costs Through Bulk Purchases
One way you can manage outgoing costs is to buy supplies in bulk.
For instance, you can purchase plain black lanyards in bulk to issue to your staff. Most wholesalers can significantly discount goods if you buy enough of them.
Make a list of all the supplies needed to run your business. It might look something like this:
- Staff uniforms and lanyards
- Tea, coffee and milk
- Inventory to sell
- Paper and printing supplies
- Fleet vehicles
- Computers and phones
- Office equipment and stationery
- Tools and equipment
This is not an exhaustive list, but you get the jist of it. Once you’ve jotted down your list of supplies, it’s time to approach your bulk suppliers.
See if you can purchase bulk items required to run your business and what discounts you can leverage.
If you have a good relationship with a supplier and can guarantee regular bulk purchases, you may be able to snare a decent discount that can help you manage your outgoing costs.
Outsource Business Functions
A significant cost to business owners is in-house functions such as payroll, bookkeeping and human resources.
This is a high outgoing cost if you have people performing these roles employed in your business.
You must pay their wages, any performance bonuses you’ve arranged, retirement pensions if you offer this, and other associated overheads.
Furthermore, recruitment and onboarding are associated with significant costs if you need to replace one of these staff.
One savvy way to reduce this outgoing cost is to outsource these functions to another company.
Some firms specialise in providing outsourced payroll, HR and bookkeeping that can save a decent cost when compared to employing roles to perform these duties.
The savings could be in the tens of thousands or more, depending on what you pay your current staff. It’s worth considering if you can cut costs by outsourcing.
Review Your Premises
A significant outgoing cost for most businesses is commercial rent for their office, warehouses or other premises.
Commercial real estate is always expensive and can be a massive drain on your coffers.
As you grow, it’s worth considering if your current premises are fit for purpose.
For instance, you might be able to reduce costs if you move your office further out, towards the urban belt of your city.
Or, if you have a hybrid workforce and don’t require ample office space, you could downsize your office and save some money on rent.
Shop Around For Insurance and Utilities
Your insurance and utilities are another considerable outgoing cost that can be cut during growth periods.
Depending on the type of business you’re running, you may have to pay for public liability insurance, workers’ compensation insurance, indemnity insurance, fleet vehicle insurance and more.
You should review your insurance yearly and see if you can get cheaper premiums by shopping around.
Depending on the size of your business, it may even be worth approaching a business insurance broker who can negotiate with insurance companies on your behalf and get you a better deal.
After you’ve done that, it’s now time to review your utility costs.
This is your power, gas, internet and phone bills. Loyalty doesn’t pay for utilities; this is as true for businesses as it is for consumers.
See if you can find a better deal on your utilities, and you can reduce your outgoing costs as you scale up.
Consider Leasing Equipment and Fleet Vehicles
You must spend money to make money; this has always been true. As your business grows, you’ll often need to invest in equipment and vehicles.
One way to manage this outgoing cost is to lease these items instead of buying them outright or financing them with a business loan.
With smaller, regular payments on a lease rather than a large lump sum, you can effectively manage your outgoing costs.
Other advantages include always getting the latest equipment and vehicles, and for the vehicles, the serving, tyres, insurance and registration costs are often bundled into the lease.
The leasing company can usually manage repairs when required as well.
The great thing about this strategy is that your leasing costs are typically tax-deductible, reducing your business income for the financial year.
Cut Back on Staff Travel
You might be paying too much for staff travel and accommodation if you run a national business.
Travelling to suppliers, clients or customers or attending conferences or summits costs money. You can cut this outgoing cost by using online meeting tools like Zoom or Teams and encouraging your staff to avoid travel unless necessary.
Pay Down Business Loans or Refinance
You may be bleeding cash in repayments if you have taken out business loans.
Interest rates for business loans can be a killer and can add up to thousands a month or even a week, depending on the scale of your business and the size of the loans.
If you have any cash reserves, paying down some of the debt could result in increased cash flow as the repayments can be reduced with a lower principal.
Any option is to refinance if you have multiple loans or credit card debt for your business.
By bundling all your debt into a single loan with a hopefully lower interest rate, you can simplify the repayments and focus on paying down the debt.
Cut Staff Bonuses and Commissions
Staff bonuses and sales commissions can be an excellent incentive for your staff to perform well, but they can represent a significant cost during growth.
If you want to focus on growth and cut costs, you can pause staff bonuses and commission payments until you’ve achieved your desired growth.
This informative article has shared how you can stay on top of outgoing costs through a business growth period.
These tips should assist you in managing your cash flow while you focus on scaling up the business and achieving the growth you deserve.