Published by Marc Freedman on April 14, 2020
If you are a business owner, you are likely feeling the effects right now of the COVID-19-induced economic downturn and looking for creative ways to reduce overhead costs.
- How to Prepare
- General Tips
- Cutting Costs Around the Office
- Cutting Costs on Rent and Leases
- Cutting Costs for Retail Owners
- Cutting Energy Costs
- Cutting Contract and Insurance Costs
Before You Get Started
Before you start reviewing this list, we encourage you to create a list of your expenses. We’re not saying you need to know what a spend analysis is or how to conduct one, but you should at least get an idea of what you’re paying in overhead before you start looking for ways to cut overhead.
Who knows. You just might find expenses that you didn’t even know you were paying for – that’s the first place to cut.
Check Your Invoices
We’ve written about this before and we want to draw attention to this again: you should always presume all invoices may be wrong.
We don’t say this so that you can be openly combative with your vendors. We say this because roughly 1 out of every 10 invoices that we examine for clients has some kind of error.
All invoices are input by humans and humans can make errors. Those errors translate into real world dollars and our clients are the ones who find out they overpaid. For businesses affected by the economic downturn caused by COVID-19, spending an hour or two to review what you’re paying for, could pay off big.
Find Out How Much You Might Be Overspending
Another way to help gauge how much you can save is to download our Savings Potential spreadsheet. After you tally how much you’re spending on overhead, you can input the annual figures and receive estimates across each spend category on how much you could save annually. These are real world numbers – the average savings we usually find for our clients.
Hire an Expense Reduction Consultant
Another effortless way is to hire an expense reduction consultant who can do all of the work for you. The best part is you are usually not going to pay anything unless they can find savings. They usually work on contingency – meaning they only get paid when they save you money. To learn more about how it works, read our guide to hiring an expense reduction consultant (aka cost savings consultant)
That’s what we’re here for. You tell us your situation in a quick 5-minute email and then we look at what you’re spending, identify opportunities to save, and we make it happen. You pay zero out of pocket and we split the savings with you. Contact us to learn more today.
Cutting Costs Around the Office
We’ll start with ways you can cut costs around the office. We suspect you have already done some of these, but a few will surprise you.
Are you still paying for Microsoft Office? It may be time to examine how much you’re paying and consider alternatives. Depending on your office needs, you may be overspending.
An Office 365 subscription for non-enterprise businesses ranges from $5/mo/user for the bare bones version to $8.25/mo/user for the basic version to $12.50/mo/user for the full version, which translates into $60-$150/year/user.
Microsoft Office Home & Business 2019 entails an one-time purchase of $249, but you lose out on ongoing updates. Microsoft releases a new version of Office every 2-3 years, which could translate into a lot of savings with the one-time purchase.
If you only need the standard suite without online features, like OneDrive and Teams, you’re likely overspending by $50/person after two years and $200/person after three years with the full version. A good alternative to OneDrive and Teams is Google Drive and Slack.
Google Docs, Sheets, and Slides is outright free initially while G Suite designed for businesses ranges from $6/user/month to $12/user/month to $25/user/month at the enterprise level.
Unnecessary Software-as-a-Service (SaaS) Subscriptions
Many organizations lose track of all the software-as-a-service subscriptions they pay for. Now is a perfect time to inventory everything – send out an email to all departments and individuals to find out what they use. You may discover subscriptions people forgot about, ones with overlapping functions, or ones you no longer need.
Check Pricing for All Subscriptions
Sometimes software companies reduce the pricing on their services to make them competitive to new subscribers, but don’t notify existing subscribers that they could be paying less. After you inventory your subscriptions, check out the pricing pages on their website to compare. If you do find out you’re paying more, call up your account representative to request the new rate.
Pay Annually for All Subscriptions
Whenever you can, switch to paying for all your subscriptions annually. Software companies usually incentivize you with a discounted annual rate or 1-2 months free. These savings add up quickly so it’s always worthwhile when you have the cash.
Coffee is a great perk when we are at the office. It may be surprising but you could save thousands of dollars if you look at what kinds of coffee you serve. Bagged coffee, even gourmet brands, is significantly less expensive with less environmental impact than single cup or K-Pods.
Here’s a quick comparison:
Average cost of a K-Pod in a 96 count box:
- Subscription: $53.97 for the box, or $0.56 per pod/cup
- One-time purchase: $71.96 for the box, or $0.75 per pod/cup
Average cost of the same coffee in a bag:
Starbucks, 20 oz bag: $13.99 per bag, or $11.20 per lb, or $0.25 per cup
In most cases, you’ll be paying double by buying K-Pods over bagged coffee. If you switch to brew by the pot, you can cut your coffee costs in half instantly. For a company with 25 employees who drink two cups of coffee daily, switching from the cheapest subscription K-Pod to bagged coffee will save you $2,730 or more annually. You can also save with bulk delivery or reusable filters for your Keurig.
The costs associated with printing add up fast because they entail a number of different costs. Here are a handful of ways you can save on ink, toner, and printer maintenance.
Go Digital and Print Less
Going paperless sounds obvious, but it is the easiest and quickest way to save money on your printing costs. Asking employees to only print what is necessary can save you a lot.
Purchase Off-brand Ink Cartridges and Buy in Bulk
Consider purchasing compatible ink cartridges for your printer. Going with the manufacturer’s cartridge can be significantly more expensive. The ink in the cartridge is just ink, and there is usually nothing inherently special about it. If you have a large office with staff that print frequently, this is something to consider.
A lot of online retailers offer discounts for bulk purchases so if you have the budget, buying in bulk can be the way to go. Just don’t purchase more than you can use since cartridges can expire over time.
Print More Efficiently
- Print in Black and White – Setting your printer to print in black and white will save on color ink, which is more expensive.
- Print in Draft Mode – Set your printer to print in draft mode under settings so you use less ink and toner. It is a good way to save money on your printing as you can always adjust the settings when you need higher quality.
- Print Double-Sided – This might not work for everyone, but printing on both sides of paper means using half as much paper as before.
- Change Default Fonts – Some fonts use less ink than others. For example, Times New Roman uses less ink than Arial and will save you money on printing. Try reducing your font size to 11 pts and only use bold as required since it uses more ink.
- Buy a Newer Printer – New printers are usually more efficient. Old printers use more ink and the cost of their cartridges increase as demand declines.
Use a Managed Print Services Provider
If you have multiple devices and print a lot, consider hiring a company that provides managed print services. Depending on your volume, this can be an excellent way to save, especially if your print volume is consistent from month-to-month. Additionally, you get a service contract for your printer, so if anything goes wrong, the technician comes and fixes the issue at no additional cost.
Are you paying separately for phone and internet? You can bundle both with your internet service provider to cut costs.
Are you still paying for a landline? If you want to go completely digital as a small business, Google Voice offers a starter subscription for $10/user/month for up to 10 users. You can set up calls, text messages, and voicemails to forward to an app or another number on another device, as well as make calls and respond to messages directly on a computer.
Are you still faxing? In most cases, you don’t need to. Documents can be scanned and emailed, you can take a photo with your mobile phone, or share it over a secure file hosting service. Plus, many VOIP systems offer fax services. Eliminating faxing is one less piece of equipment you need to buy, maintain, and repair.
Real Estate: How to Lower Your Rent
Reduce or Eliminate Your Office Space
With many workforces working remotely during COVID-19 stay at home mandates, you may find the physical office is not as necessary as you once thought.
For anyone that works primarily with a computer, everything can be done online and remotely. If you have disciplined employees, they can work from home partially or entirely, allowing you to cut out the costly fixed expenses that come with using a lot of office space, or you might be able to get rid of your office outright.
In addition, remote workers working from home translates into lower utility costs, fewer office supplies, less office equipment, less office space, and so on. Like any decision, it can have downsides, so make sure you do the research and weigh the pros and cons.
Renegotiate Your Lease
We’ve mentioned this before, you can renegotiate your lease (and you should). You can haggle over rental rates, what they improve, fee adjustments, and what factors into common area maintenance (CAM) versus what they spend on operational expenses. In this current climate with many businesses not even using their office space right now, landlords realize that they need to be reasonable and are more willing to negotiate than when demand is high.
Retail: How to Reduce the Cost of Doing Business
Check Your Merchant Fees
It is always a good idea to check what you are being charged for credit card processing fees and make sure you are using the correct code for your specific business. If you aren’t, you could be paying extra in interchange fees.
Check to see if you are using a tiered structure – can also be referred to as a bundled structure. If you are, get out of it as soon as possible. These are pushed on merchants because it offers a simple way to show you what you’ll be charged and usually leads with the most attractive rates. This rarely translates into anything beneficial for the business owner – tiered pricing typically hides the true cost of processing payments and results in small business owners paying more than they should.
Implement Cash Discount Programs
Debit and credit cards may be very convenient to the consumer, but processing them aren’t for your bottom line. Cash discount programs allow you to cut down on paying merchant fees while helping your customers feel better by saving on the things they already buy.
Credit Card Machines
Are you still paying monthly fees on your credit card machine? You really don’t need it. Point-of-sale (POS) systems have evolved and multiplied in recent years, offering a number of alternative solutions for businesses that provide more flexibility and lower fees.
For many businesses, PayPal will get the job done just as well. If you require a physical point-of-sale system, Clover, Square, Stripe, SumUp, and many others offer or sell credit card readers that attach to your phone or are used in their own multi-functional POS systems.
Energy: How to Keep the Lights On All Year Round
Shop Around for Energy Rates
Have you heard about energy choice? We wrote about this a few months back.
Energy consumers have long assumed that there is only one energy company in town and have not given much thought to shop around. State governments deregulated markets in recent years and now many consumers can now choose from different energy providers for electricity, gas, or both. Check out which resources are available in your state or use this tool to find out how much you can save on your energy bills.
Evaluate Your Electric Bills
Do you know what you are paying per kW/h? Most people don’t off-hand. They also don’t know how much the going rate is either.
We’ve saved clients a lot of money by looking at this very-overlooked expense. If you have multiple locations spread across multiple states, you could be spending a lot more than you need to.
Contacts and Insurance
Make Sure You Read the Fine Print
As one final tip, we’ll return back to the point we made at the top: scrutinize documents. Just as we suggested that you treat all invoices as suspect, you should also read through the fine print of your contracts because things can be overlooked and humans can make the occasional error.
For example, we discovered that employees were classified incorrectly in workers compensation premiums for a client. It caused very high overcharges and an inflated employee modification rate (EMR), which both sides – our client and their trusted provider – assumed were correct because neither had reason to doubt the contract. Over a few years, our client overpaid more than $1 million.
We hope our tips helped you identify one or more ways you can cut costs right now. With the economy slowing down, business owners are focused on streamlining costs so they can keep employees and the systems critical to keeping business going. We think most of these tips will save you money and many of them are quick wins.
That’s where we come in. We specialize in expense reduction and there is more to it than looking at a few invoices and identifying things you can cancel or eliminate. The best part is you don’t have to do much to make this happen. One email is all it takes and we do the heavy lifting for you.
To put it in other terms, you have a source of revenue you didn’t know about and we’re here to help you find it by simply spending less. Most of our clients save 18% on what they’re currently paying in the areas we examine. You pay zero out-of-pocket and we split the savings with you. Contact us to get started saving right now.