10 Ways to Cut Business Costs

Even with less expensive technology and marketing tools, running a business cost money, and those costs increase regularly. To help keep your profits up, you need to control expenditures. Here are ten ways you can reduce your business costs and improve your bottom line.

01 of 10

Lower Your Office Space Costs

Woman working on computer in home office
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Depending on the commercial real estate situation in your area, you may be able to take advantage of depressed prices for office space to move your business to less expensive quarters or negotiate with your existing landlord for better lease terms.

Better yet, if you don’t really need to run your business from commercial premises. why not operate from your home or go mobile? As an example, many of the tech repair businesses have given up attempting to compete with big box stores selling computer equipment and now operate mobile tech services that provide in-home computer sales, repair, and tutoring. Trades such as plumbing and electrical and services such as bookkeeping are ideal home-based/mobile business candidates.

In addition to savings on office space, operating your business from home can save you money on insurance, business taxes, and utilities. However, if you are thinking of converting to or starting a home-basedbusiness, some preliminary research is required. There may be zoning or other local bylaw issues that prevent such activities in your neighborhood. There are also other considerations such as how keen your family is to live with a business every day.

02 of 10

Cut Staffing Costs

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Use family members in your business wherever possible. Your spouse might be willing to take on a duty of your business, thereby saving you the expense of hiring someone else to do it.

If you have children of an appropriate age, why not get them involved in your business wherever possible? Learning about business is an excellent experience for young people and it keeps money in the family. 

Have an unemployed millennial living in your basement with a degree in gender studies and no job? Employ them in your business and give them some valuable work experience as well as boosting their self-esteem. As per normal employees, ​family members working in your business are fully deductible as a business expense.

Depending on your business, another way to save on employee expenses is to hire contract workers or freelancers, which saves on taxes and other employee-related expenses. Just be sure you adhere to the IRS guidelines on what constitutes a contract worker versus an employee.

03 of 10

Barter for Business Goods and Services

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Bartering is nothing new as it has long been a way for people to exchange goods and services. If your business has excess capacity, why not put it to use by bartering for some other product or service you have a need for? 

Perhaps you are a web designer with a sore neck from spending all day in front of the computer. Pick up the phone or check online for a physiotherapist or chiropractor willing to exchange services for web design work.

Besides bartering opportunities in your area, there are also a number of online barter exchanges that charge a monthly or annual fee for listing your services or use an exchange credit system where you use/accumulate "barter" dollars to pay for business services.

For bartering to succeed both parties must fulfill their obligations. Service-to-service exchanges can be problematic unless specific timelines are established for providing the services. As with any business relationship, do your homework before entering into a bartering agreement with someone you don't know.

Note that business bartering is treated as a normal business transaction, in that you've received "payment" for the goods or services you have provided, and therefore the benefit you received is taxable.

Bartering can be a great way to help your business through slow periods as well as build up valuable relationships with other businesses. A classic win-win!

04 of 10

Cut Vehicle Expenses

Peach Delivery Van with the words Look Georgia Peaches painted on the side
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If you are running a service or contracting business that requires a vehicle, you are no doubt well acquainted with how vehicle costs can affect your bottom line. Fuel and servicing costs for larger vehicles such as vans, crew cabs, etc. can be astronomical. Other than reducing business vehicle use to essential travel only, how can you reduce your vehicle expenses?

One way is to not pay as much for the vehicle to begin with. Buying a new heavy-duty truck or cube van for your business can be a serious wallet-buster. If you are willing to settle for something that isn't new keep an eye on the online classifieds and cruise dealers lots to find a good, used vehicle in decent repair. 

As an example, a person who owns a company that services lawn/garden sprinkling systems may be able to purchase a used van in excellent condition from a defunct plumbing repair business at a fraction of the cost of a new vehicle.

If you are racking up a lot of mileage on your business vehicle(s), reducing fuel consumption is very important. Diesel and hybrid vehicles are more expensive to purchase initially but can pay off in the long run with fuel and maintenance savings. Newer trucks are using more exotic materials to reduce weight and improve mileage, so it may be worth trading in your gas-guzzler for a more fuel-efficient vehicle.

The U.S. Department of Energy has a website that allows you to calculate the "payback period" for a hybrid vs. non-hybrid vehicle. For a vehicle driven 20,000 Km per year, it might take 6 or 7 years to break even with fuel savings on a hybrid given the higher initial cost. The more mileage driven per year, the quicker the payback. The payback period for diesel vehicles is typically much shorter than for hybrids.

If your business is just starting out or finances are tight, leasing a vehicle has a number of advantages, including fixed monthly costs, the ability to return the vehicle at the end of the leasing period, and freedom from depreciation and maintenance costs. Most leasing companies offer lease-purchase agreements so you can buy the vehicle at the end of the lease term if that makes sense.

Order Supplies

Cut expenses driving to the store for your office needs. Many places offer free shipping which means you don't have to waste time or money to get the items you need.

05 of 10

Cut Supply Costs

Two bakers working in kitchen
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When it comes to wholesale supply costs, every penny saved is a penny earned. If you are running a business that regularly makes a lot of wholesale supply purchases, getting the best deal on supplies can make a huge difference to the bottom line.

As a business owner, this means that you need to be constantly monitoring supply costs by checking for discounts and investigating alternate sources. As an example, a bakery owner might discover a new warehouse is selling flour for 25% less than their current supplier. The owner can either go back to their existing supplier and ask for a 25% discount or switch suppliers.

Some people find it embarrassing to ask for discounts. Don't be as many businesses will offer discounts on products and services to other businesses, especially if you're a regular purchaser. Just remember that you may need to reciprocate at some point!

One way to increase your odds of getting discounts is to make yourself popular with suppliers and other businesses by paying your bills promptly. Late payment fees and credit card charges can add up to thousands of dollars a year. Some suppliers also offer discounts for early payment.

"Co-opetition" is another way of reducing supply costs. This involves finding other businesses and pooling your resources to save money on supplies and goods. The concept can be extended to other aspects of business as well, for example, sharing office space or advertising costs.

06 of 10

Cut Advertising Costs

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With more potential customers online than ever before, advertising does not have to be expensive. Start with building an online presence by creating a website and using social media to reach your market. Email is another highly effective low-cost marketing solution. You can send out news, discounts, tips, and other information to build rapport and keep your market aware of your business.

Publicity is free and is a great way to build your credibility. Other great free and low-cost options include cold calling, asking for referrals, and always carrying business cards.

Referral program.

Turn your best customers or clients into your sales force by starting a reward or brand ambassador program. Let your happy customers market for you!

07 of 10

Cut Insurance Costs

Businessman walking through door out of a smoking room
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Insurance is an expense no business can afford to avoid. Without it, an accident or lawsuit could put you out of business. For that reason, it is best to get as much business insurance as you can reasonably afford. 

Sit down with your insurance broker and discuss all aspects of your insurance coverage and have them shop around to get the best deal. There can be surprising differences in rates for the same coverage by different insurance providers.

Make sure you're covered for all important areas of your business including workers' compensation, disability, property insurance, and unemployment policies. Also consider industry related insurance needs, as well as location, such places that have the need for flood or earthquake insurance. Look at ways to reduce your risk, including evaluating your location for issues such as fire hazard or a natural disaster.

Installing fire alarms, sprinkler systems, and security systems or guards can make you eligible for insurance discounts. The lower your risk from the insurer's point of view the lower your premiums are likely to be.

If you are operating a home-based business, be aware that your home insurance may not be enough to cover your business. Make sure your insurance broker is aware that you have a home business and that you have adequate home and business coverage.

If you have a larger business with a lot of insured assets you should do an asset review along with your annual insurance renewal and make sure that you are not insuring assets you no longer have.

Increasing your deductible is one way to reduce your premiums. Just make sure that the amount of your deductible is not so high that it would be unaffordable for your business if you had to make a claim.

If you are a member of a business or professional organization, you may be able to take advantage of group rates. The reduction in insurance costs can often more than offset the costs of membership.

08 of 10

Make the Most of Your Time

Clock that has the words Save, Save, Save! instead of a 1 on the clock
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Many business owners swap time in an effort to save money, but it's important to know the value of your time and make sure you're using it efficiently. If you're driving an hour to pick up business supplies to save on $10 on postage from ordering it, you're essentially saying your time is worth less than $10 an hour, not to mention the gas and wear and tear on your car. Instead, you can order the supplies for a $10 delivery fee, and use the hour not wasted driving to earn much more than that in an hour.

Efficiency leads to more productivity and profit. It starts with knowing your goals, being organized, and having a plan. Some of the most successful entrepreneurs swear by a morning routine that sets the day for productivity. Have a daily schedule that you stick to and have time management tricks to keep you productive and efficient. Finally, delegating or outsourcing, as well as using apps and other automation tools can help you take care of business needs while focusing on what you do best in your business.

09 of 10

Keep the Taxman at Bay

List of various Tax Deductions on a paper
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Minimizing your tax bill can be the most beneficial way to improve your business bottom line. This means maximizing all your available business deductions to reduce your tax liability.

Get in the habit of keeping track of all business expenses by saving receipts, and recording vehicle mileage when traveling for business purposes.

If you have family members working in your business, they are treated like any other employee for tax purposes, which means they are a business tax deduction. To qualify for the deduction, make sure that each family member properly records hours worked as do regular employees. Also, the salary or contract rate must be commensurate with the position (and age if the employee is a child).

10 of 10

Switch to the Cloud for Your Business Computing Needs

Woman standing on ledge in a power-pose over clouds and 1's and 0's in the sky representing cloud computing
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For most businesses, cloud computing is an excellent way to reduce both capital costs and ongoing expenses related to IT services.

With cloud computing, gone is the need to purchase and maintain expensive servers onsite, as well as pay for ongoing software upgrades. By using the cloud you will always have access to the latest versions of business applications and the flexibility to increase your bandwidth or storage on demand.

Your cloud provider will also take care of most data recovery issues, freeing your business from the requirement of maintaining a complex IT disaster recovery plan.

Another benefit is your ability to access your business data across various platforms, such as your tablet or laptop, as well as ease of collaborative work with your team.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Ohio University. "Telecommuting Can Save Businesses Money." Accessed Jan. 20, 2020.

  2. U.S. Small Business Administration. "Pick Your Business Location." Accessed Jan. 21, 2020.

  3. Small Business Administration. "5 Reasons to Hire Your Child." Accessed Jan. 20, 2020.

  4. Internal Revenue Service. "Topic No. 420 Bartering Income." Accessed Jan. 20, 2020.

  5. Minority Business Development, U.S. Department of Commerce. "10 Cost Saving Ideas for Small Business Owners." Accessed Jan. 20. 2020.

  6. Harvard Business Review. "Use Co-opetition to Build New Lines of Revenue." Accessed Jan. 20, 2020.

  7. USA.gov. "Buying Insurance." Accessed Jan. 21, 2020.

  8. Internal Revenue Service. "Family Help." Accessed Jan. 21, 2020.

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