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Effective WaysReduce Operational

Costs

Effective ways to Reduce Operational Costs

Small businesses often work on tight margins.

As a result, startup owners are always on the lookout for growing the revenueto sustain a healthy profit. Profit margin is a simple mathematical equationthat depends on two factors: revenue and expense. For achieving highermargins, you have only two choices—either to increase the revenue or toreduce the expenses.

Increasing revenue without overloading the employees or sacrificing thequality of offerings is a difficult task - especially with tight finances andlimited resources. The second option, reducing expenses, is far morestraightforward. Streamlining your expenses will have a direct impact on yourprofit margin.

Cost cutting is arguably the easiest way to improve the profitability of yourstartup venture. Introducing a systematic cost-control method can result inimmediate savings. At the same time, it would ensure competitive profitmargins in the longer run.

So what are the best ways to reduce operational costs? Let's find out threeeffective ways to achieve your target without compromising on the qualityand performance.

3 Ways to Reduce Operational Costs

Effective ways to ReduceOperational Costs

1. Embrace TechnologyTake a look at your current administrative processes and identify areas thatcould be automated using technology, instead of manpower. The businessworld is changing rapidly and keeping up with the latest advancements byharnessing technology will result in significant reduction of operational costs.

There are several online solutions that can automate various small businessfunctions at a fraction of the cost involved in employing human resources. Byautomating repetitive tasks, you can save hours of manual efforts every day.Your employees can utilize the time to improve the business productivity.Moreover, machines are not prone to committing mistakes. Thus technologyallows businesses to eliminate human errors.

How Technology Can Reduce Operational Cost?Reduce Payroll Burden

3 Ways to Reduce Operational Costs

Effective ways to ReduceOperational Costs

Instead of employing a team of accountants and finance officers, you canimprove the efficiency by incorporating an accounting and invoicing software.It would eventually help you to make a decent saving on employee wages.

Lower Marketing Costs

Traditional forms of marketing are costly and outdated. You should leveragethe power of internet to reach out to millions of users online. As you mightalready be aware of, there are both free and paid advertising opportunitiesavailable online. Instead of hiring a marketing agency, you can make use offree classifieds websites and cheap CPC advertisements to promote yourbusiness. Not only it would come out cheaper, but also be more targeted andeffective.

Pay Less for Office Essentials

Technology can be used to reduce the expenses on office essentials. In thisage of Skype and Google Voice, do you really need to pay hefty bills on mobileand landline usages? Similarly, you can embrace technologies like GoogleDrive or BaseCamp to centralize documents and file storage instead of usingpaper documents. That's a smart way to get rid of the costs associated withprinters and paper-works.

Save on Travel Expenses

Commuting costs and travel allowances contribute a significant percentage ofthe total operational expenses for any business. You can make a decentsaving by organizing meetings and presentations online to get rid of travelexpenses. Cisco WebEX can be an excellent utility to conduct meetings,webinars and presentations online. MeetingBurner is another online videoconferencing tool that you can use for free.

3 Ways to Reduce Operational Costs

Effective ways to ReduceOperational Costs

Consider OutsourcingStrategic outsourcing of secondary business functions is another smart wayof reducing operational costs. It will help you to keep your organization slimand trim - reducing payroll costs at the same time. Instead of diverting yourfocus and efforts in managing non-essential tasks, you can devote the time onrevenue-generating activities.

Think about the services that don't need full-time employees. Small ITbusinesses can outsource hardware support activities instead of hiring full-time hardware engineers. With only a handful of computer systems tomanage, you don't need an in-house team of hardware specialists. Computersdon't crash every other day. But when it does, you can always take help froma service center in your neighborhood. Besides fixing your computers, theycan provide you a number of value-added services including softwareinstallation, troubleshooting performance related issues, and periodic systemmaintenance activities.

For example, let us take into consideration the case of Dave's Computer.Computer repair is the focal point of their business, but they are equallyproficient in data recovery, virus and malware protection, and performancetuning. So it does make sense to have tie-ups with external vendors for theservices that you don't use often.

What Are the Areas that Could be Outsourced toReduce Operational Costs?Tax Preparation

3 Ways to Reduce Operational Costs

Effective ways to ReduceOperational Costs

Preparing tax return is one area where you don't need dedicated employeesthroughout the year. When you would hardly need them for a month or two,then what's the point in adding a tax professional in your payroll for theentire year? You should better utilize the service of a professional tax agencyon a need basis.

Customer Support

Every business deals with customers and customer support is one area thatnobody can afford to ignore. Having said that, maintaining a customersupport team of your own can be a costly affair. Add to that the cost ofrecruitment and training. That's why the majority of small businesses preferto outsource customer support activities to an external vendor.

IT Infrastructure

Today's business world is dominated by computers. It is impossible toimagine a modern business that doesn't rely on computers in one way or theother. Building and maintaining your own IT infrastructure is difficult andexpensive. That's precisely the reason behind the booming market for infrastructure-as-a-service (Iaas) providers. In a typical IaaS setup, theservice provider owns and maintains the hardware, while you need to pay asmall monthly subscription fee to use their infrastructure.

Make Smart Hiring DecisionsYou can effectively reduce yearly expenditure on human resources by makingsmart hiring decisions. Look around for applicants with multiple skills. Ifyour new receptionist knows a bit about content marketing, then that's ahuge positive.

3 Ways to Reduce Operational Costs

Effective ways to ReduceOperational Costs

Another excellent idea is to hire contract professionals instead of full-timeemployees. There are exceptional professionals in every sector who prefer towork for themselves. Many small businesses are turning to freelancers forgetting ad-hoc jobs done and it has revolutionized the way startups competewith established organizations in today's competitive marketplace.

Hiring freelancers and interns can turn out to be a money-saving master-stroke for small businesses. From content writers to graphic designers, andwebsite developers to marketing experts, you can hire them for a specificperiod of time on a need basis. Contract professionals are hired for as long asit takes to get the job done, and you don't need to pay them when there's nowork.

The work gets done and the overhead doesn't get added to your payrollcommitments. Isn't it a win-win situation for both the parties concerned?

Freelancing Opportunities that Small BusinessesCan Benefit FromCopywriting

Need a copywriter to create engaging content for your new website or lookingfor someone to draft your weekly newsletters? Have a look at the popularfreelance marketplaces like UpWork or Guru, you can find tons of talentedcopywriters to get the job done at a fraction of the cost involved to employ afull-time copywriter. Freelance copywriters usually charge hourly or per wordrate. A rate of around $15 per hour or $0.05 per word will be enough toattract the top quality freelance copywriters.

Web Development

3 Ways to Reduce Operational Costs

Effective ways to Reduce OperationalCosts

You can employ a freelance web developer to build your business website. Itis a cheaper option compared to appointing a full-time web developer orusing the services of a professional web development agency.

Search Engine Optimization

Organic visitors are the driving force behind the success of any onlinebusinesses. While large-scale businesses have the budget to build an in-house team of SEO experts, it could be difficult for startups to employ a full-time SEO professional. That's where freelancers come to the picture.

Graphic Design

Need a quick flyer designed? Looking for a graphic artist to create the landingpage template for a new marketing campaign? For ad-hoc design relatedtasks, a freelance graphic designer fits the bill perfectly. Fiverr.com and99designs.com can be your best bet to find an awesome graphic designer foras low as $5 per task.

Final ThoughtsReducing the operational costs is a proven practice to gain better margins.But to do that effectively, first and foremost, you need to identify the rightareas where it is feasible to reduce overhead. If required, involve yourcustomers and suppliers to evaluate possible areas of improvement. Properassessment of your profit and loss statement is equally important as youdon't want to take any undue risks that can have an adverse impact on theperformance of your business.

3 Ways to Reduce Operational Costs

Effective ways to ReduceOperational Costs

It is important to remember that there is no 'one-size-fits-all' approach tocutting costs and improving profitability. It varies from one business toanother. Something that works for you, might not work for someone else.However, a business with streamlined operating expenses is in a better shapeto push for improved margins, so do ensure that you are running a tightship.

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3 Ways to Reduce Operational Costs