5 Cost Cutting Ideas for Small Businesses

There are two ways to increase the revenue for your small business: increase sales or reduce expenses. Increasing sales is always challenging as it needs heaps of marketing budget. This is one reason why most small businesses prefer cutting cost whenever they want to increase revenue quickly. According to McKinsey Quarterly survey, 79% of businesses have cut costs in response to economic crisis.

Following cost cutting ideas will prove to be beneficial for your small business now and in the future.

1. Use automation

Automation will save you some serious bucks (especially in the long-run). According to CNBC, chatbots can help businesses cut costs by more than $8 billion a year by 2022. Risk based maintenance tools like Limble can help reduce repair costs by as much as 80%.

Chatbots and CMMS aren’t the only automation tools that your business can use to cut cost, the list is potentially very long. For instance, marketing automation tools, invoicing tools, CRM, data analytics, management tools, and so on.

An automation tool comes with a price (sometimes a hefty price tag) but it pays off in the long-run.

The best approach is to choose one small specific task and automate it such as maintenance.

2. Cut employee expenses

When you switch to an automation tool, you don’t have to fire employees. This isn’t a nice approach. Downsizing is the last resort and should be treated like one.

Cutting employee expenses is a better approach. There are several ways you can cut employee cost such as free lunches, weekend parties, get together, unnecessary official and unofficial trips, etc. You’ll notice that there is always room to cut employee expenses without harming their productivity.

Besides, there are several other techniques such as:

  • Office resource sharing
  • Office transport route reduction
  • Reduce office meetings
  • Hold pay increase

Your employees might not like it, but you have to do it because there aren’t a lot of things that please your staff.

3. Renegotiate with suppliers

Your suppliers hold the key to cost-cutting because that’s where you spend a lot. Renegotiating with suppliers can save you a fortune. No, you don’t have to ask for a discount directly but think from a different angle.

There are four ways to negotiate with powerful suppliers, according to HBR.

You can use first two techniques for renegotiation.

For instance, you can change the way how you buy from a supplier. If you can help your supplier in terms of bringing value, this will prove to be a game-changer.

The thing is, if you reach out to your supplier with a discount request, you won’t get a reply. Nobody will give you a discount unless there is something in it for them.

Find how you can be of help for your supplier and then proceed with renegotiation.

4. Go paperless

If your business isn’t paperless yet, going paperless is your best bet. Statistics show that the average cost of a four drawer filing cabinet is $25K and it costs an additional $2K to maintain it. Besides, your employees spend a lot of time in finding, handling, and reproducing documents.

Get rid of paperwork once and for all and save money. Lamar University decreased its cost of printing from $2,325 to $1,048 after switching to paperless.

Switch to cloud storage or any other file management system that suits your small business. It will cost you money to find, implement, and train your employees but you’ll never regret it.

The best part, you can achieve full ROI in as low as 6 months.

5. Outsource

If nothing else works, outsource.

It is one thing that is sure to cut cost and overhead. A survey from IT companies revealed that 30% of IT companies reported that outsourcing helped them save cost while another 55% reported that outsourcing was somewhat effective to reduce cost.

The real question is what to outsource.

Outsource small non-strategic tasks and projects such as a specific marketing campaign, online advertising, billing, shipping, logistics, and others.

Outsourcing doesn’t just help cut cost but it also provides you enough time to focus on strategic business tasks.


Cost cutting is rarely instantaneous. Don’t expect return immediately. Consider cost reduction a lifelong and long-term activity that will continue to pay off for years to come.

Implement one cost cutting idea at a time. Measure its impact, and then move to the next.


Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles by others on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com