How to Reduce Expenses and Operating Costs: 34 Experts Reveal the Single Most Effective Way for Businesses to Minimize Costs

Last Updated: January 14, 2019
 

From payroll expenses to raw materials, utilities, facilities, and more, there are many costs that go into running a business. Of course, some businesses are leaner than others, developing efficient ways to operate with minimal overhead without sacrificing the quality of the products or services the business provides.

The lower your operating expenses, the higher your profits. But how can business owners reduce expenses and minimize operating costs effectively – without risking a decline in quality? What areas can businesses examine to trim the fat and operate more efficiently?

Whether you’re just starting your company or you’ve been in business for decades and are looking for ways to cut back on your expenses, these questions are probably weighing prominently on your mind. To gain some insight into the most effective ways businesses can adopt a leaner mindset, we reached out to a panel of business owners, executives, founders, and experts and asked them to weigh in on this question:

“What’s the single most effective way for businesses to reduce expenses and operating costs?”

Meet Our Panel of Business Owners, Founders, and Experts:


Aaron UdlerAaron Udler

@OfficeProU

Aaron Udler joined the OfficePro team in 2013 as the President and CEO. After earning his BA from Indiana University in Communications, Aaron spent 14 years in the tradeshow, conference, and exhibition industries.

One of things we have done is migrated over to Office365 and the E5 license…

I think it costs us approximately $50/month/user. To give you an idea on cost savings, each phone line we had was approximately $50/month/line. I have 10 employees and 10 phone lines. So I used to pay $500/month in phone lines. Now I pay $500/month for both my phone lines and Office365/Office2016 as we are using the Skype for Business dialtone. In addition, I don’t have to worry about the VOIP hardware and the maintenance costs associated with that as each one of my employees dialtone’s is on their computer. I did issue each employee their choice of a Bluetooth headset or a corded headset to take their calls.


Mike CataniaMike Catania

@PromotionCode

Mike Catania is a serial entrepreneur and the co-founder/CTO of the savings community PromotionCode.org. He has also worked as an adjunct professor and a business mentor for other small businesses in the Las Vegas area.

It’s easy to overpay for hosting that you don’t need…

Popular, and expensive, dedicated server bundles are understandably going away in the name of scalable cloud options from companies like Amazon Web Services and Azure. It’s a fairly painless migration, and you can expect to see savings of 20% or (much) more, depending on how bloated your dedicated server packages were.


Andrew SchrageAndrew Schrage

@MoneyCrashers

Andrew Schrage is the CEO at Money Crashers.

The single most effective way to reduce small business expenses, generally speaking, is…

To outsource your work. As long as you hire highly qualified and vetted freelancers, you can save a bundle over hiring full-time help. Just make sure that you interview candidates correctly, and let them understand what’s expected. This is a lot better than hiring full-time employees, and you can save on payroll expenses as well.


Matt CollinsMatt Collins

Matt Collins is the owner and founder of Loans Now, a financial education and lending platform that has helped thousands of people to secure funds during emergency situations.

The single most effective way for businesses to reduce expenses and operating costs is…

Negotiate better prices.

If you work with vendors and suppliers often, negotiating better prices can have a tremendous impact on your expenses. Ask your supplier if a renegotiation is possible, and if they decline, re-approach them with quotes from 3-4 other suppliers. Vendors are in business to make money, and in many cases, they will be willing to reduce their prices to beat out other bids and maintain your long-term business. By saving even a few cents on every product you sell, you can decrease expenses and increase profits, significantly.


Stan TanStan Tan

@stanleyreporb

Stan Tan is the marketing manager at Selby’s.

We have a lot of fixed costs in terms of printing machines, which cost us in the six-figure range…

If the printers don’t print, we don’t make money, so the fixed costs are quite high. The advantage is that when the printers print 24/7, our costs don’t go through the roof.

However, the best way we’ve found to reduce expenses is to partner up with a printing company overseas. The good thing about this is that we don’t put up any expenses, and we only pay for the products we order. This cuts down our capital requirements significantly.


Zondra WilsonZondra Wilson

@BluSkinCare

Zondra Wilson is the Founder and CEO of Blu Skin Care.

One of the best ways to reduce expenses and operating costs is to…

Reduce the telephone expenses.

Disconnect the office landline, and if you are a small company, allow your employees to make calls from their mobile phone. At the end of the month, the company can reimburse them.


Sophie KnowlesSophie Knowles

@pdf_pro

Sophie Knowles is the founder of PDF Pro, an online software tool for editing PDF files.

When it comes to reducing expenses and operating costs, my greatest advice is to…

Invest in a Document Management System (DMS) — or the way your organization stores, manages, and tracks electronic documents.

A good DMS will improve your workflow while also trimming the budget. Toner cartridges, office machine troubleshooting and maintenance, and reams of paper quickly become expensive. By reducing your dependence on paper-products and related items, you’ll easily see some quick-wins on your balance sheet. Digitalizing will also better your productivity by providing a seamless solution to document sharing as well as freeing up valuable administrative time spent locating documents.


Steven BensonSteven Benson

@SteveBenson

After receiving his MBA from Stanford, Steve worked in Sales at IBM, HP, and Google, where he was Google Enterprise’s Top Sales Executive in 2009. In 2012, he founded Badger Maps, the #1 Sales App in the Apple App Store, which helps Field Sales People be more successful.

The most meaningful way for a business to reduce expenses is…

By keeping salary costs down. The best and fairest way to do this is to be generous with equity to round out your employees’ pay packages. I can’t compete with a high-performing public company like Facebook or SalesForce on salary, but they can’t compete with me in my ability to award employees with ownership in the business. This has the added benefit of aligning them with the long term success and values of the business. You’re setting yourself up for failure if you hire people who care about their salary more than about having a meaningful role in creating something new or experiencing an accelerated career development.


Shana HaynieShana Haynie

@ArtworksByShana

Shana Haynie is the COO at Vulpine Interactive: a Social Media Marketing agency for exciting brands.

The single most effective way to reduce expenses and operating costs is…

To know exactly where your money is going and to consistently be auditing your expenditures. This means keeping detailed books and always thinking about ways to optimize. Are you paying monthly for a SaaS tool that you aren’t using? Are you overpaying for internet? Are your employees being utilized to their fullest potential? These are the types of questions you need to consider on a regular basis to make sure you are keeping your expenses and operating costs in check. When you find extraneous costs, eliminate them.


Marcus HarjaniMarcus Harjani

@marcus_harjani

Marcus Harjani is the Co-Founder and Chief Operating Officer at FameMoose.

It may seem obvious, but the simplest way to reduce costs and expenses is to…

Be ever vigilant about your expenses and profit margin by automating your efforts. While every business has different expenditure requirements and costs, establishing a process by which you regularly assess spending efficiency is the key. Many tools exist now to analyze costs and I recommend taking advantage of them (even a basic spreadsheet). Don’t forget that your time is a cost as well, so quantify your own efforts when looking for ways to reduce costs.


Earl ChoateEarl Choate

@concrete_decor

Earl Choate is the CEO of Concrete Camouflage Acid Stain, a company that designs and sells artist grade concrete stains and floor waxes for floor renovations.

One effective way to reduce business expenses is…

To utilize freelancers and contractors for specific assignments. Rather than hiring, on-boarding, and training a full-time employee, it is often cheaper and easier to work with independent contractors. There are two primary benefits to this strategy:

1.) You don’t have to offer benefits such as healthcare or paid vacation leave. You just pay them for the work they do. This is especially useful for seasonal businesses.

2.) You can focus on what you do best. Outsourcing works well if the job being done is outside of your expertise. For example, at our company we outsource our website design. This allows our team to concentrate on product development and customer service, so we don’t have to educate ourselves in a new business area. Our time and resources are allocated properly.


Yves FrinaultYves Frinault

@yvesfrinault

Yves Frinault is the Co-founder and CEO of Fieldwire, a technology company that has built a mobile collaboration platform to improve efficiency and communication between construction workers on site.

The best way to reduce business operating expenses is by…

Reducing waste and improving team efficiency.

The great thing about this strategy is you don’t have to cut back and risk growth. You just have to find ways to allocate resources properly. For example, a lot of companies still use paper for file management even though it’s cheaper and faster to store documents electronically. Paper is a small expense, but it adds up when you consider the time it takes to print and organize physical files. Another example is not utilizing employees properly. You want to put people in roles that maximize their talent. This can decrease expenses because your team members will be more productive, meaning more and better quality work will get done in less time.


Matt BentleyMatt Bentley

@matt_bentley

Matt Bentley is the Founder and CEO of CanIRank SEO Software.

One of my favorite strategies for cutting operating costs is…

To embrace a remote work environment. I’m a huge proponent of allowing employees to work remotely because it provides them with a better work-life balance. They have the autonomy to determine where and when they work. This helps companies save money in two ways. First, it can improve employee retention, which means you don’t have to invest as much into recruiting and training new team members. Second, you don’t have to pay for a physical office. An office is one of the largest expenses companies have each month. Not having an office can be a strategic advantage. It allows you to run a lean business.


Robert EllisRobert Ellis

@massagetablenow

Robert Ellis is the CEO of Massage Tables Now, an ecommerce company that sells massage tables and supplies.

My tip for reducing business expenses is…

To shop around for suppliers. You can often drive down prices by getting several quotes and weighing your options. A lot of people are afraid to negotiate, but it can be an effective way for companies to lower their costs. The more options available, the more leverage you have to negotiate a cheaper price.


Deborah SweeneyDeborah Sweeney

@MyCorporation

Deborah Sweeney is the CEO of MyCorporation.com. Based out of Calabasas, CA, MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, trademark, and copyright filing services.

I believe owners should delay compensation based on cash flow and use annual renewals…

It is important to pay attention to unnecessary expenses and cut them when cash flow is a problem. Subscriptions, coffee for the office, even extra office perks can be cut back during cash crunches. Buy in volume during times when cash flow is less of an issue and try to stock up during strong seasonal times. Determine what you will spend versus what can be cut out — the more detailed you can be, the better.


Saloni DoshiSaloni Doshi

@ecoenclose

Saloni Doshi is the owner of EcoEnclose Packaging, a sustainable packaging company based in Colorado.

One of the most important things a small business can do to reduce expenses and operating costs is to…

Invest in green technology.

‘Reduce, reuse, recycle,’ is no longer just a personal mantra, as environmental efforts can bring huge advantages to the workplace. In general, green technologies are made to use resources efficiently, which in turn leads to financial savings for the business owner. For example, CFL and LED lights use far less energy than traditional bulbs. For us, switching to CFL bulbs in the warehouse saves hundreds on electricity each month..

We also try to keep with the ‘less is more’ ideology by only using quality products, especially when it comes to shipping. A high-quality, sustainable packaging tape will get the job done using less tape and save us from reordering time and again. Even something as simple as printing on both sides of the paper or cutting down on printing altogether can save a small business hundreds in stationery costs annually.


Scott W JohnsonScott W Johnson

@marindependent1

Scott Johnson lives and works in Marin County California, where he spends his time hiking, skiing, mountain biking, and spending time with his two boys. He is the owner of WholeVsTermLifeInsurance.com.

If you want to reduce expenses, break your lease…

Break my lease? Why would you want me to do that?

Although this may sound crazy, breaking your lease, working from your home, and having your employees work from their homes could be the best business decision you ever make. Although this is certainly not practical for all businesses, it is practical for more businesses than they think.

Remember the days when people opened store fronts to attract new clients? The idea was that people would drive by your business and consider stopping in. Right? But less and less clients are choosing businesses based off what they drive by and more and more clients are ‘driving around on the internet’ to find the service they need by browsing Yelp, Google Reviews, Forums, etc.

If you still don’t believe me, ask yourself this question: “When was the last time I bought something based more on someone’s physical location rather than their internet location?”

The money that you used to use to pay your rent can now be turned around into an enhanced internet presence. A new website, contact forms, advertisements, ad re-targeting, blogging, guest blogs – the opportunities are endless.


Anders MikkelsenAnders Mikkelsen

Anders is the Managing Director for Berlin Pacific.

Stop spending money on costs that don’t add value to your customers…

For many businesses, the people who work there are their biggest expense. Ask, “Could we grow by delivering to our customers by hiring contractors until we need full-time staff? Are our full time people underutilized, and can we give them more to do that increase our ability to serves customers without stressing them out?”

Know your business, and find a repeatable method to weigh your options, and make the most effective decision.

Part of this is knowing how your business is profitable. If you run events, you don’t want to spend money on hiring more staff for events that are profitable but not spend money on hiring staff for events that aren’t.


Dr. Elliott B. JaffaDr. Elliott B. Jaffa

Dr. Elliott B. Jaffa is a behavioral and management psychologist and creative problem solver with over 25 years of training and management experience.

As a behavioral and management psychologist…

The first question I ask a chief executive when conducting an Organizational Audit is “How many of your employees are totally worthless to your organization?” Whether a private company, government agency, association or mom-and-pop operation, the reply is usually between 12 percent and 20 percent.

The second question I ask is, “Why are they on your payroll?”


James R. NowlinJames R. Nowlin

@JamesNowlinTPM

James R. Nowlin is the founder and CEO of corporate consulting firm Excel Global Partners and author of The Purposeful Millionaire: 52 Rules for Creating a Life of Wealth and Happiness Now.

The single most effective way for a business to reduce expenses and operating costs is…

To embrace technology. There are numerous online systems and software programs that can automate both essential and non-essential business functions that will save you a lot of time, money, and manpower. Most notable of examples of these are computerized accounting systems, integrated payroll systems, and cloud-based collaboration platforms.


John MossJohn Moss

@EnglishBlinds

John is the Managing Director at English Blinds, manufacturers and online retailers of luxury, made-to-measure window blinds.

Use technology to automate wherever possible…

Technology deployed and implemented correctly will save time, reduce human error, and increase efficiency. Look at all aspects of the business where technology can be utilized: accounting, payroll, sales, marketing communications, purchasing, production, etc. Streamline or eliminate manual and repetitive processes wherever possible. Make use of the systems and software programs out there designed to automate many business functions. Identify key functions or processes where bespoke software created for your specific business needs will reduce costs going forward. Taking a holistic view to the use of technology throughout your business will have a dramatic impact on reducing costs.


Levar HaffoneyLevar Haffoney

@LevarHaffoney

Levar helps business owners operate, expand, and exit their businesses. He is also a lecturer on Personal Finance and Investing at York College – City University of New York.

The single most effective way for businesses to reduce expenses and operating costs is to…

Outsource accounting operations.


Andrea MaximAndrea Maxim

@AndreaMaximND

Dr. Andrea knows first hand how difficult it can be to stand out in a crowd of your competitors. Early in her career as a naturopathic doctor she realized what it takes to get ahead and get noticed. In her first year, she generated almost six figures in revenue and has grown her income every year since, while getting married and having two children under 3 years old. Keeping her pitbull-like focus, she is now successfully running 3 practices, from Haldimand County to Burlington, and has written her first published book, MAXIMized Health: A New, Intelligent System for Optimal Digestion and Hormones. She has also launched the Profitable Practice Podcast, helping NDs around the world better understand how to start, build and grow their practice.

My #1 way to keep business costs low is…

To carry a small amount of inventory at any given time. It’s easy to want to buy higher quantities to get the product discount or free shipping, but the expense of doing so, without moving inventory quickly, is a massive expense on the business with money literally collecting dust on the shelf. I prefer to collect orders of needed products before placing an order with the distribution company and/or only having 3-4 of each item on the shelf and waiting until bare before re-ordering.


Sean MallonSean Mallon

@bizdaqsean

Sean Mallon is the CEO at Bizdaq – a business transfer marketplace – and has over ten years’ experience in working with small business owners. He helps small business owners find buyers and buyers find businesses.

Having worked with small business owners for over ten years…

I’ve found there’s one way to reduce costs that’s often overlooked – upgrading equipment.

So many companies are using, and are continuing to use, outdated or ill-functioning equipment, and it’s costing them both time and money. Cafes will use coffee machines that need replacing, restaurants use cookers that don’t work like they used to, and offices use computers that are slower than they should be – all because business owners are scared of an initial cost.

While it might be an initial layout, the benefits can be tenfold. Upgrading equipment frees up both productivity and time, allowing employees to work harder and get more done in the same period. This can be the boost many companies need and has the added benefit of paying for itself over time. This reduces your operating costs, as tasks take less time, and can even reduce your expenses if your equipment is losing or damaging stock. When you’ve tried everything else, look to your equipment.


Adam WatsonAdam Watson

@lightupmirror

Adam Watson is the director of Hollywood Mirrors.

I regularly trim the fat on my expenditures…

I usually allow for a marketing campaign to run 3 months, then review it. If it is not producing ROI, I cut it immediately. I use the Pareto principle with marketing and most other areas in that 20% of your marketing will bring about 80% of your results, so trimming marketing expenses is the first place I look.

I believe it is possible to be able to trim your costs down by at least 10% each quarter. Other areas are getting better prices on stationery, raw materials, and utility bills on comparison websites. It is a case of going through the profit and loss statement and going through your operating costs one by one and asking yourself if you need it and what value it brings. If it doesn’t add value, it’s time to get rid of it.


Jason ParksJason Parks

@TheMediaCaptain

Jason Parks is the owner of The Media Captain, a digital marketing agency based in Columbus. Jason has been featured in the New York Times, The Huffington Post, Inc., Yahoo News, Search Engine Watch, The Columbus Dispatch, and Entrepreneur.com. Jason has assisted in launching successful digital campaigns for Fortune 100 and Fortune 500 companies to medium and small-sized businesses.

Business owners should actually get their hands dirty and execute on the project themselves…

My sister and I started one of the largest marketing agencies in Ohio, The Media Captain, and one of the largest dermatologist backed e-commerce skin care websites, DermWarehouse.

We have been able to keep our business expenses down over the years because we deploy many of the tactics ourselves, from implementing marketing strategies such as SEO and PPC on the agency side to shipping the skin care products ourselves, managing inventory, and taking on customer service.

I feel too often business owners look to delegate, which is fine if you don’t posses a certain skill set. What is overlooked is how much time it takes to train someone and the energy you spend on managing them. In many instances, it would be easier to execute on this yourself. When you are trying to save money, this is a great route to take.


David BatchelorDavid Batchelor

David Batchelor is the President and Co-Founder of DialMyCalls.com.

Plan quarterly reviews of your company’s books with key team members…

As your business grows, the amount of money flowing out for various services and products your company uses will continue to grow. If left unchecked all these expenses can add up quickly, especially recurring billing plans. Its essential to set aside one day each quarter (or month is better if possible) to sit down and go through each expense and make sure you’re using it.  If you’re not using it, cancel it immediately. This can be an eye-opening experience and really trains you to watch your overall spend.


Courtney BarbeeCourtney Barbee

@thebookkeepernc

Courtney Barbee is the COO at The Bookkeeper.

For the majority of our clients, we have found that…

A simple audit of their current, ongoing expenses is a quick and effective way to save their companies large amounts of money. Often they are paying for products or services which they no longer use nor need, just because they’re used to seeing the bill or auto-draft come through each month. We also look at vendors whom they’re overpaying and either negotiate for better rates (often with the same contract currently in place) or recommend other vendors who offer better services at lower prices.


Gideon LipnickasGideon Lipnickas

@NewConcept180

Gideon Lipnickas is the owner of a design and build company New Concept 180. He is committed to providing his customers the highest quality of expertise and service. Regardless of size or complexity, he works with any home remodeling project together with talented architects, designers, and other professionals.

How to reduce operating costs and expenses? Spend more…

Invest in your company’s future. Here’s the deal: by spending money on your business improvement, you’ll receive a higher ROI. The sooner you start, the stronger the company becomes. Choose your investments wisely and spend less on things that don’t have much value in your business future.


Bret BonnetBret Bonnet

@qualitylogo

Bret Bonnet is a co-owner/founder of Quality Logo Products, a $40M distributor of promotional products located in Chicago, IL.

The single, most effective way for businesses to reduce expenses and operating costs is…

Via the use of automation.

For most companies, payroll is their biggest expense AND liability. There’s a reason companies like Facebook and Google generate such an insane amount of revenue per employee (when taking the average) – their systems do most of their work for them. They’re able to scale on demand with minimal investment in human capital.

The best thing about automation/computers is they don’t complain, they don’t require insurance, they can work 24/7, and they don’t get hurt on the job!

Finding tasks and operations that can be automated will not only save you money, but in today’s economy, it’s almost critical to one’s very survival!


Val SlajusVal Slajus

@VISExterior

Val Slajus is a hard-working roofing business owner who puts 100% of effort in whichever job he chooses. He founded VIS Exterior company because he believes that his knowledge can help others transform their houses into the beautiful homes they deserve.

Do your research…

Dedicate time to analyze where you put your money. Write down every single expense you can think of and cross out everything that you can live without. What’s next? Follow the plan to the smallest detail and think of the most efficient ways to invest the money.


Linas Kliarskis Linas Kliarskis

@acitydumpsters

Linas Kliarskis is the owner of a dumpster rental business in Chicago area – A City Suburban Services. He’s always been interested in different business ventures and ideas. He started his own business 20 years ago and it has been the most challenging and exciting journey ever since.

Time is money…

Don’t waste your time on meetings. Simply stated, let your team do their job without interruptions. Why does this matter? Using your team’s time more efficiently reduces expenses on unnecessary tasks. That’s not all; think of efficient ways to spend your employees’ time. Try your workers in different roles to find their strengths. Encourage your team’s creativity and give chances for new responsible roles. Use the saved time for brainstorming new project ideas and strategies that can benefit your business.


Sarunas BudrikasSarunas Budrikas

@Angle180inc

Sarunas is the owner of a marketing agency, Angle180. He is a web design and development expert who is passionate about delivering extraordinary user experiences for each and every every client. As an SEO expert and strategist, he can optimize your website to get the most ROI.

Periodically review ALL the expenses…

Knowing where every single dollar goes makes cutting costs very easy. While analyzing expenses you find points to negotiate with a service provider. Not only that, you can cut unnecessary services and expenses completely. I love it because it works for everyone and can be implemented right away.


Andrew LegrandAndrew Legrand

@LawByLegrand

Andrew Legrand is the founder of Spera Law Group, LLC in New Orleans. The firm helps small business owners proactively avoid legal pitfalls, so that they can focus on what matters most to them. SuperLawyers selected him to their Rising Star list in 2015, 2016, and 2017.

The single most cost-effective way for any business to reduce expenses and operating cost is…

To invest in a good business attorney early in the process and before problems arise. Regardless of the industry, location, size of the business, or any other demographic, the common theme among business owners is that they will all encounter a legal issue at some point or another.

In my experience with business owners, some owners prefer to address these issues proactively, while others decide to wait until the you-know-what hits the fan to do something about it. Unfortunately, the business owners who wait are usually stuck with a much higher bill. Or, even worse, they are stuck in a situation in which we can’t help them and they are forced to shut down the business or sell it entirely (usually at a significant loss compared to if it had been run properly).

So while a lawyer may not reduce your expenses today, a good business lawyer will help you figure out how to reduce and potentially even eliminate future legal issues.

Therefore, the best way for any business to reduce their costs is by investing in a business attorney early on.


Angela Stringfellow

Angela Stringfellow is a writer with 10+ years of experience. She focuses on news, trends, and insights in marketing, business, and technology.

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