Operating costs, if left unchecked, have the ability to spiral out of hand and do some serious damage to a business. Many services and suppliers are taken for granted and therefore never critically evaluated; variable costs may be managed incorrectly, with considerable money spent on overtime or excess personnel; renft may be too high for a given business; and the business may not be using technology to effectively streamline its workflow. These are all common issues that can have deleterious effects on operating costs, and this article will unpack each, offering suggestions on how to reduce costs.
Evaluate Any And All Services And Suppliers
Know where your money is going – that’s the bottom line. Look through your expenses, and if your business is continuing to pay for a service that it hasn’t used in a half year, or a service that is no longer pertinent to the business, it’s time to cross out that service. It may seem logical to tell yourself, ‘well, the business might need it one day, and besides it’s such a small percentage of the operating cost that removing it isn’t worth the risk.’ This isn’t shrewd thinking; don’t pay for anything that is not directly useful.
As for suppliers, loyalty isn’t the worst thing to have, obviously, but if you are searching for ways of reducing operating costs, unfortunately that starts with re-evaluating suppliers. You get your paper from this place, but that place offers it for slightly cheaper. Your existing supplier will understand why you have to make the move – this is the cost of doing business.
Outsource
Especially in the legal industry here in Canada, outsourcing (what they call “legal process outsourcing”) is becoming increasingly popular for its convenience and its cost-effectiveness. A law firm that is seeing an increase in work can control its variable costs by enlisting the help of an outsourcing network like LexLocom to offer temporary support at a good price, thereby making two operating costs unnecessary: overtime and added employees. This same principle can be applied to all businesses (and, indeed, your business could even outsource its legal department to LexLocom’s network), with the end goal being greater flexibility, and in turn lower operating costs.
Look Into A Co-Working Space
The actual cost of the physical space in which you do business is a large portion of your operating cost, unless of course you own an E-Commerce business. For brick and mortar businesses, the temptation is there to want your own office, even if there is too much space, and even if it eats up an unreasonable about of operating costs. If corporate ego isn’t an issue, look into any of the many wonderful co-working spaces in Canada.
Make Modern Technology Work For You
In this informative Entrepreneur article about using technology to cut costs, they offer suggestions on automation, cloud-based infrastructure and, effectively, outsourcing certain services to free apps. All great suggestions, especially the first. Automation in particular can really help reduce operating costs, since it frees up resources and unnecessary employees.
In conclusion, be careful with your money, and critically evaluate every dollar spent; don’t simply do things because that’s the way they’ve always been done, in other words. By re-evaluating services and suppliers, outsourcing, cutting down on rent with a co-working space, and using technology, your business can greatly reduce its operating costs.
