Five sustainable ways to reduce expenses (and how I managed to grow my business in 2020 despite the Coronavirus pandemic)
I think we can all agree that 2020 has looked nothing like we thought it would back in January when we were planning our year, setting goals, and making those resolutions that this would be the “best year ever!” I know I had quite the list of projects to tackle, big audacious goals to achieve, and income projections that were stretch goals for sure. And while I’ve been extremely fortunate to have plenty of work this year (albeit it work that has mostly happened in the margins of being a mom to two kids who have been home from school for nine months), most of my income projections fell a little short when I did a mid-year check in around June. But honestly? This is probably the best thing that could have happened!
Why you ask? Because it was a catalyst to review my expenses. Cutting costs isn’t always fun but it can be such a necessary step in business growth. Most of us never want to be forced into this scenario but when we are, it can be a time to experience real growth as a business owner. But what’s the right way to cut costs and can it be done sustainably? It certainly is possible to cut costs without making big sacrifices. I’m going to pull back the curtain a bit and let you see exactly how I made this work which resulted in not only meeting those early January net income projects but exceeding them, even in the midst of the Coronavirus pandemic!
Here are five areas you can assess when it’s time to look at reducing your expenses:
Create and Stick to Monthly Budgets
If your small business is going to operate in an efficient and sustainable way, it makes sense to have a monthly budget in place and stick to it as much as possible. When you have a budget, it gives you structure and ensures you know how much you can spend and when the money tap needs to be turned off. There’s little point in creating these budgets if you’re not going to stick to them. I created a budget for my business in January and set a reminder in my Simplified planner to check it each month. I use Wave for my business accounting so every month I just run a quick expense report there, compare it to my budget spreadsheet, and note any areas where I’m over. I’ve also made it a practice to consult the monthly budget before I make any purchases over $50. This has definitely kept me from spending on some frivolous items this year!
Review Your Purchasing Procedures
It’s a good idea to take a step back and assess how you’re spending your money and in what categories your spending tends to fall. You should try to review your purchasing procedures carefully and see how and where they can be improved. If this is something you haven’t done for a long time, you’ll probably find that reviewing your purchases allows you to find ways in which money can be saved.
When I looked at my 2019 expenses, I was shocked. I was basically using my business account as a slush fund to buy all kinds of stuff — makeup, clothes, eating out, etc. There’s nothing inherently wrong with this approach but it didn’t align with my business goals. In 2020, I began to pay myself a salary every two weeks and only spend from that pot of money. This made a huge difference in my net income for 2020 vs. 2019. I also made a few other changes:
I ended my subscription to Quickbooks and switched over to Wave (which is free). I realized that I wasn’t using the full capacity of Quickbooks and that Wave offered me everything I needed. This saved me $27 a month.
I paid for the annual plan of Dubsado versus paying the monthly rate which also saved me money. And, using Dubsado to its full potential has helped me get paid faster with all of its automation features. Plus, I swear I have gotten more clients since using their integrated system of lead generation, proposals, contracts, and invoices.
Outsource IT Support
It’s often a good idea to explore the merits of outsourcing certain tasks. Your business can’t do everything to a high standard in-house, so making use of things such as IT support services is wise. If you are a larger business with multiple employees, outsourcing IT support can save time and money over the long-term. And, chances are high that you’ll experience less downtime, as well as fewer cybersecurity issues, which is critical in today’s business environments. This may even include items like website maintenance. If you factor in the time you spend making website updates, chances are good that your time could be better spent on your primary business functions and leaving those admin tasks to someone else.
Produce Some of Your Own Energy
This year, more than ever, many business owners found themselves working at home either 24/7 or way more often. This could definitely lead to higher energy costs at home. If possible and available in your area, it could be a good idea to produce some of your own energy. One of the easiest ways to do this is to use solar panels fitted to your business or home. The energy produced could cover at least some of your business’s energy requirements. We are lucky to have an amazing business here in my community that is skilled in this area and they have already made huge progress in equipping some of our local schools and businesses with solar panels. This is definitely on my radar for next year!
Switch to Free Online Marketing Solutions
If you’re still paying a lot of money for old and outdated marketing methods (hello tv ads, I’m looking at you), it’s probably time to re-evaluate. Not only are digital marketing methods more effective at reaching people these days (and much easier to track RO), but they can also be carried out more affordably. Good social media marketing, for example, can be inexpensive or even for free if you’re willing to put the work in with great returns. Plus, email marketing is living its best life ever right now and can be the number one way to cultivate customers or donors. (I love, love using MailerLite and highly recommend it!)
In addition, evaluating your website costs is an important annual step as well. In my experience, my clients have saved hundreds of dollars every year by switching to Squarespace’s all-in-one hosting and gained even more benefits than they had with other providers. (By the way, this is a service I provide with every website audit — helping you audit your current web expenses and identifying ways to reduce them).
As you can see, there are plenty of ways your business can cut costs, and it can certainly be done in a sustainable way. Don’t feel as if you need to completely throw out everything at one time. In most cases, modest spending cuts in the right areas can make a big difference. Choose one or two areas to evaluate and go from there!
When you are able to objectively evaluate your expenses, work hard toward meeting your revenue goals, and have a good handle on the financial state of your business all-year long, you’ll find the path to meeting those stretch goals feels like a breeze!
Do you have creative ways to cut expenses? If so, leave them below in the comments!
Until next time,
Andrea
P.S. This is a topic I mention often to my email list. If you’re not on the list, let’s fix that. Join here!