How to cut expenses like a pro ... creative ideas to eliminate or reduce expenses.
Let's discuss an often overlooked area in business -- how to cut or eliminate expenses. If you want to be more profitable, grow your sales, and improve cash flow, let's learn how to succeed at cutting expenses without taking away from your ability to deliver quality in your business.
I'm excited to share some practical ways to eliminate and reduce expenses overall. Now, I don't know about you, but as a creative business owner and somebody who's been in the salon space for most of my business life, I never gave this much thought at all in the first 10 years I was in business.
My thought process for so many years was always, hey, let's think of that next great thing -- the next thing that we're going to do and create or deliver that's going to grow a bunch of sales. So that's where my heart naturally would go.
I'm not sure about you, but as a creative business owner, I was always focusing more on identifying that cool thing we're doing next. Finding new customers or growing revenues sure seemed a lot more exciting than sitting in the office going over bills and budgets. And that's why this was kind of a very big blind spot for me for a lot of years. And once I started to take a deep dive and take a look at it, it really helped me start looking at profitability in a different way. At the end of the day, it's not how much money you make, it's how much you keep.
You don't want to just be spending a bunch of money on a bunch of useless costs and expenses that are not serving you, your business, your customers, or your team.
Given that background, let me share some ideas with you. Depending on what kind of business you have, obviously, you need to do what's best for you in your business.
And with so many of us having different businesses or having transitioned our businesses, I had to look at this a lot differently this year than I did last year. So, here's one of the things I want to walk you through.
In your business right now, do you have landlines or a fax number?
Oh, my God. I mean, I think I got rid of my fax number at the salon at least four or five years ago. But seriously, I was paying for it much longer than we ever really needed it. I know it seems minute, but if you still have landlines or a fax number, cut those costs down because there are so many ways to automate that you do not need to be paying for all that.
How to cut expenses like a pro ... creative ideas to eliminate or reduce expenses.
I know when we opened the salon, we had four lines. But over time, because we automated things and people would prebook or you could book online. There were fewer phone calls so you can change the number of phone lines that you have and cut the overall cost.
When was the last time you looked at all your vendor options -- everything that was out there? It might seem difficult to reduce your utilities, but there are always ways you can cut out expenses that you don't need. Even not keeping the heat turned up as high.
I know that was something for us to look into at the salon.
Sometimes, it would get so hot because of the blow dryers going even in the winter months. So it didn't make sense to keep the heat up as high in the winter, even though, in the morning we'd be a little bit chilly. But we'd be sweating if we turned on the heat. And then nobody really wants their hair done from this sweaty gross person. Honestly, it just doesn't fit our beauty brand.
We figured out Hey, let's not crank the heat because the blow dryers are going. Plus, we didn't want to look gross and be sweaty. But it actually became a good way to reduce the expense of paying for too much heat. That's something you might just want to pay attention to. You could also consider software to monitor your temperature because just changing the temperature one to two degrees, can save you 15 percent every month. Which really adds up.
You may be able to reduce utility costs by seeing if there are alternate suppliers. Don't hesitate to think about reaching out to your utility suppliers. Just pull out all your expenses, print out the entire report in Quickbooks, or have your accountant or bookkeeper give it to you, but spend time immediately going over all your expenses with a fine-tooth comb.
If you think, hey, I have a vendor that has been underperforming or maybe you've been hearing about somebody that can do better for your business or they have more to offer. I'm all about loyalty in business as long as everyone's doing their part. We have had situations where we have awesome vendors and they took excellent care of us.
We were in a great relationship. They did so much to serve our business and they really helped us. And then sometimes, they would swap out a new person and it wasn't the same person we had developed that relationship with. So same company, but the different person as a representative. And it wasn't as good. If another vendor can serve you better, by all means, look into it.
When you have vendors calling on you, you're the customer. They should be serving you in a way that really helps you serve your customers the best way possible.
Another thing is to consider is downgrading your utility expenses. When you first open a business, you've got so much going on or you've been running a business for so long, you've got so much going on that you could be being overcharged for utilities.
Think about possibly getting some comparison quotes -- it can't hurt to get the information. And this is not the sexy side of the business, but here's the thing. You might look at it like, aw, I really don't have time to do that. I promise you, every person I have ever coached or trained about this, any business owner I know that's gone through this says their time was not wasted. They always discover something hidden.
They got back money for the time put into doing this by the cost savings. You may think I don't have time, but if you could be reducing the money that is just flying out the door, you will be grateful that you did it. Sometimes you can get a better rate or a better contract on any of those things, and that could be really useful to grow your business the way you need to.
Another huge opportunity is your insurance premiums. Sometimes by eliminating coverages that you don't need or increasing deductibles can save a lot of money. Take a look at your insurance premiums and put them out there for quotes, maybe another insurance company has a better offer or a deal for you. In the salon world, when your equipment starts getting older, your insurance is never going to give you the money to totally buy brand new anyway.
It's just not going to happen. So you might not want to be spending as much as you did when stuff is brand new when your equipment has already depreciated. Just make sure that you have the right amount of coverage on everything that you are insuring both in your building and your equipment needed to operate and run your business.
Now, let's discuss labor costs. I have always struggled in this area and it's not one that I do well or easy. I always struggle here. Sometimes you may have somebody on your team that has already quit but has not told you yet.
I'm going to repeat that. Sometimes people on your team have already quit and they just haven’t told you yet! I know this is true for a lot of business owners and salon owners. We talk about this all the time that a lot of times in business and this is true of many businesses, it could be a doctor's office or law practice.
It could be a store. It could be a salon. It could be a million other types of businesses. A lot of times you have employees and team members on your team that, honey, I hate to be the one to break this to you, but she already quit. She just didn't tell you yet and you know it by her performance. So that team member is no longer contributing to the overall growth of sales and profitability of your business. It's probably time to let him or her go.
The thing is that you sometimes can consolidate things that you might be paying someone to do and if they're not pulling their weight anymore or the business used to be a good fit for them and they used to fit with your culture, but maybe they've changed or they have decided they're passionate about something else. Hey, it does not matter. God bless them always. We wish you the absolute best. But if those two things are not aligning anymore, let everyone have more love and joy in their heart and part ways so that you can grow your company.
Think about reducing costs, by not keeping people on your team that don’t produce but think about it as a way that you're letting them go so they can go be their best self somewhere else. It's not a negative. Sometimes it's really positive when you know that someone's performance is not matching their potential, it's time to let them go.
Many businesses have had to spend more time hiring people that can clean given all the restrictions on all types of different businesses. But there might be a way to consolidate some of those overlapping roles or jobs within your company.
Don't be afraid to think of a hybrid job description.
I've been suggesting t a lot of my Salon owner clients and other business owners that I coach and consult, they may have a newer team member that is training to be a stylist, (or just starting out in their new chosen profession) but that stylist is getting paid hourly and not bringing in enough revenue to cover her hourly expense. To make it a win for the business, she can take over a shift at guest services so she can get to know more of the clients.
She can take over 10 hours a week doing social media and marketing. She can spend 10 hours a week cleaning. There are many ways to not have to let anybody go but adjust their job description. While they're still learning to produce revenue, you can keep them on the payroll. And that is a win-win for everybody.
Whenever possible, think about hiring on a contract basis. A lot of us in business are moving to more of a gig economy. Don't be afraid to hire a contract person.
Sometimes just going outside of who's already on your team and just hiring specifically for that gig is going to be cost-saving overall.
Eliminating or reducing operational expenses -- I want to tell you a funny story. When you think about your operational expenses, we had this Rug service that used to come to the salon every week called Spirit Rugs. No offense to you guys at Spirit Rugs, but here I just have to say this.
Spirit Rugs was just something that I think we signed up for the first week we opened. They came in multiple times a week and they billed us for it. I never realized until a very deep dive on expenses. And I'm talking about 12 years later, taking a deep dive and looking through how they charge. If you order more things from them, like toilet paper, cleaning products, hand sanitizer, you could reduce the cost of what they charge you for shipping it and dropping off the rugs. We were paying so much to have them come in twice a week to change out our rugs and by actually ordering more goods from them we saved ourselves so much money overall.
OMG, who knew that? By knowing exactly what people are charging, including the background or hidden fees, you can take charge of your expenses. I also want to suggest that you read Profit First, a great book by Michael Michalowicz.
He talks about uncovering expenses that are not serving the greater good of your business.
And that was one of those lessons I learned. On the first round of the deep dive with Spirit. We realized, wow, we're paying all this extra money. We don't need them to come in this many times a week. And when they do come, why not have them do more stuff? It would actually be saving us money in our business overall. So we cut down the number of times they were coming in and decided to add on some other products that we go through and use all the time to run our business. That reduced our overall business expenses by about 25%. I learned there were risks with a "set it and forget it" mentality.
Later on, when we did a further deep dive, we realized we could literally have bought new rugs every week or so and throw them in the garbage and come out ahead of what Spirit was charging us to deliver us clean rugs every week.
So no offense to Spirit, but that was not the best use of our money. This is just from a small business owner standpoint. We do not have the reserve funds to be messing around with expenses that are that high when we are working on a very small profit margin. I highly encourage you to take a look at some of these automated subscription services that you have in your business of any kind, even l flowers. One time, the flower shop that would come in and bring us fresh flowers every week. And honestly, it's pretty and it's nice, but it kept getting so much more expensive.
At some point, we just had to cut that off because it wasn't adding any overall value to our business or experience of the business for our customers. And it was becoming this bleeding hole in our business and we just couldn't find a reason large enough to continue it. Think about these things, including what you can buy in bulk and wholesale or see if vendors will let you pay upfront more and give you a reduced cost.
Here's another example. For years we had a coffee service, but then coming back from Covid, we weren't allowed to have self-help type stations set up. I think right now the regulation is, is that you may offer coffee and beverages, but they have to be served by your staff.
Just think about the coffee service, though, because maybe they're coming too often. And if you can cut it down to only once a month or twice a month instead of every week, there might be a way for you to save a lot because they're not having to drive out to you as often. if you moved it to once a month, that could be a tremendous savings because they're not driving out to you so much so you could save and they can save. Then another thing is that you may have vendors that have always been calling on you, but they're just not the best provider for you anymore, so don't be afraid to look for someone who is better for you and your business. I always go back to Netflix and we love Netflix, right? If we didn't adapt to Netflix, then would people still be doing Blockbuster?
There is this story about how Blockbuster was offered the deal from Netflix and they turned them down. But Netflix said fine, we'll do our own thing and pursued their business model without Blockbuster and it became this great thing that everybody spends money on, a subscription every single month.
The people from Blockbuster were refusing to evolve and pay attention to what was happening in the world. So use this idea of cutting expenses to pay attention and maybe get creative and come up with some amazing solutions that can be your next big thing or the huge thing that puts you on the map. You never know. Don't be like the dinosaur that was sitting in the blockbuster office that day that Netflix came in and shared their idea, don't be a dinosaur.
Make sure that you are looking into everything it takes to run your business to be profitable and successful because things change so fast.
Here's another insider tip that I want to tell you a story about.
This was a huge mistake I was making.
Make sure that you have the proper amount of inventory that you're not overstocked in inventory. I'm speaking specifically about the salon, where we had a color bar. I took a course called The Color Cleanse with Britt Seva. And it was amazing! Until this class, we just always kept reordering color. But at some point, trends change, and styles change.
The color companies are introducing new colors. So we're buying the new ones and still keeping the high levels of the old ones. We just had way too much inventory of colors that weren't popular anymore. Way too much inventory that we were not going to use. I found myself every year donating a bunch of overstock to the cosmetology schools, which is a great thing.
However, by doing this color cleanse and shrinking down the amount of inventory, we were actually keeping our inventory so that it was fresher, without buying things we didn't need.
I will tell you, though, it scared my team to death. They started freaking out thinking we were not going to have enough color. I had to walk people off the ledge. We had panic-attack-inducing conversations, even though I monitored it, I tested it. I even studied what our buying habits were for a good 14 weeks before I pulled the trigger, but people still freaked out.
At the end of the day, I think we ended up having like seventeen thousand dollars of overstock. No question, that's a huge expense.
I mean, think about what could you do with seventeen thousand dollars in cash savings? Do a color cleanse or an inventory cleanse for whatever type of business you're in and get a hold of what's really selling well right now. What’s on-trend now? What's happening? And just really be mindful of that.
These ideas should give you a wealth of little nuggets that you can pull all together so that you can have really good savings if you apply all these little ideas that we've shared today.
I know that the cutting expenses side of saving money in business is not always sexy, but if it leads you to being more creative and coming up with your next big thing!
I want to highly recommend two books: Profit First, which I mentioned earlier, and then Tax-Free Wealth by Tom Wheelwright, who talks about how business owners can save on taxes and how you can take your expenses and code them the right way so that you can save on taxes permanently.
I wish you much success in cutting your overall expenses. And I hope that you find a pot of gold at the end of your rainbow. If you need more help and to take even more of a deep dive on getting clear about what your goals are and how you want to really apply all this expense cutting, or maybe set goal areas that you need to grow sales and make it all work together, please send me an email so we can set up a coaching call or sign up for my Beyond Common goal-setting guidebook and training course. Go www.BeyondCommonBusinessSecrets.com/guide,
so you can get the goal-setting guidebook and to help walk you through making the list of expenses you want to cut.
Start with the goal-setting guidebook and a printout from your quick books or a printout from your bookkeeper and start redlining everything that you don't need anymore.
I redline everything I want to eliminate and use a different color pen to add question marks next to everything I want to look into. Ask yourself, is there a way to reduce this?
Is there a better opportunity? I hope that these practical ways to cut your expenses, along with the Beyond Common Goal Setting Guidebook and some of these books I recommended will help you get and stay profitable in 2021 and beyond. Let’s make it your most profitable year yet.
I wish you lots of business success!
Thanks for reading our blog!
Tracey Watts Cirino