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According to Bloomberg, eight out of ten small businesses fail. Some fail because they don’t adequately understand customer needs. Others can’t communicate the value of their products and services.

Still, others don’t understand how to promote themselves effectively. Yet, the number one reason businesses fail is the lack of a sustainable business model—they simply spend more than they make.

Small, local brick and mortar businesses are at greater risk because they don’t have endless cash to prop them up when the going gets tough. While those are discouraging odds, there are still tons of businesses that thrive.

If you own a small, local business, you need to look for savings wherever you can find them. There’s nothing wrong with spending money when you have to, but you should rank your priorities.

Take the time to weigh the value of the expenses while considering your overall budget. Here are  proven cost-cutting strategies to keep your small business in the black.

Invest in Technology, Cut Down Office Space & Hire Remote Workforce

Investing in technology by automating processes can help you improve efficiency, boost productivity, and reduce overall costs. Conducting virtual meetings instead of physical meetings can eliminate travel expenses and the need for office space, helping reduce business costs. Hiring a remote workforce instead of in-house employees can reduce your business labor costs dramatically while also increasing productivity.

You may also consider investing in cloud computing systems instead of in-house hardware that are usually quite costly to purchase and maintain. Other technologies like Basecamp and Google docs can help centralize your company’s documents and improve product collaboration amongst your teams. This eliminates the need for costly paper documents and physical meetings.

Reduce travel costs

Even though we’ve gained the ability to constantly be connected with people all over the world through the power of the internet, people still prefer to handle serious business face to face. Because of this, many companies have to send their employees on business trips which tend to stack up quite the cost. The first and most important step when trying to save on business travels is to plan ahead. Unless your employees need to go on urgent trips, you will likely have plenty of time on your hands to organize whatever they might need on their trip. This will allow you to find better deals on things such as plane tickets or even hotel rooms which can be significantly cheaper if booked in advance. However, there are also more permanent ways to reduce your travel costs whenever they occur. For example, using a petrol credit card can substantially decrease the amount of money you need to spend on fuel and making deals with a certain hotel franchise can reduce costs when your employees stay with them.


If someone can do something more efficiently and at a lower price than you, why do it yourself? In recent years, outsourcing has become a very popular way for a business to cut costs. In fact, 59% of all companies that outsource said the reason they did it was primarily as a cost-cutting tool. Nowadays, you can find a company that can help you outsource almost anything, but by far the most common area for outsourcing is marketing, which is something you may also want to consider. Unless you are really good, coming up with a marketing strategy is a really time-consuming task, one that, more often than not, isn’t worth the invested time. Almost any area of business can be outsourced. So, if you feel like some parts of your business are more costly than they should be, don’t hesitate to look into outsourcing them.

Make It Known That You’re Shopping

One of the best ways to reduce costs without rocking the boat, so to speak, is to let each of your vendors know that you’re going to be price shopping their products or services.

Vendors know that the cost to replace a lost client is much higher than the discount they may need to provide to keep you around. You’ll likely find that your vendors are willing to reduce the costs of their products or service to maintain their account with your business.

Some discounts will be larger than others, but the savings across your combined vendor list can be significant. You may also find that some of your vendors are willing to upgrade your service, giving you more for your current price.

If a vendor is unwilling to offer anything of value for you to remain a customer, evaluate whether or not their competitors actually can provide the same benefits to your business at a lower price. Good vendors are typically worth the investment, but taking the time to evaluate what they provide, ask for discounts, or potentially change vendors could present your business with a significant savings in the long term.

Modernize Your Marketing

Operating at your maximum in the digital age means updating every aspect of your operations, including the way you market your business. When implemented effectively, digital marketing represents an opportunity to dramatically reduce the cost of your monthly marketing expenses.

For example, print ads can be swapped for digital versions. Digital advertising platforms—like Google Adwords, Facebook, and LinkedIn—all provide precise targeting tools that allow you to reach your ideal buyer far more effectively. What’s more is that this type of precision marketing allows for the generation of better qualified leads, which make for easier conversions to paying customers.

This translates to a significant increase in your return on marketing investment and even reduces the resources required from sales to close new deals, streamlining the entire customer acquisition process.

Investments in a conversion-focused website, digital advertising, and search engine optimization can provide your business with a considerable improvement in results while reducing costs at the same time.

Hire capable employees with little work experience

Hire curious, capable people who are early in their careers. This might initially seem counter-intuitive, but people with little work experience are looking for entry-level positions and salaries, which saves your company money. Of course, there may be times when a more experienced candidate makes the most business sense, but often a solid employee with little work experience just needs a foot in the door, and you’ll find them competent and eager to do well. We all had to get our start somewhere.

Good training counts for a lot. If you do bring in employees with less workplace experience, set them up for success by training them well and checking in often to help identify and address gaps in their knowledge and experience.

Allow employees fewer hours

In a similar vein to the previous tip, this might sound odd at first. But there may be employees at your company who would transition to part-time (or even just four days a week) if given the opportunity.

This can be a touchy subject for an employee to bring up themselves, but if you as a business owner make it known that you’re open to shorter work weeks for those who might want or need them, this can save you from paying those full-time wages without having to lose a good team member (and their work product) completely.

Retain your best employees

A high performing employee, especially one who is an asset to your company culture is a valuable asset. Not only that, it’s a valuable relationship.

Costs associated with the hiring process can be shockingly high. If you have a solid team member, do what you can to keep them. Check in regularly and take the time to understand what they’re looking for in terms of career trajectory and opportunities for growth. It’ll save a lot in the long run.

Automate time-consuming tasks

There are dozens of online systems and software programs that can automate and streamline the day-to-day functions of a small business. These systems can cover a variety of tasks, including accounting, website hosting, marketing communications, payroll, and more.

Technology is useful because it promotes efficiency. The result of efficiency is a reduction in operating costs in areas such as direct labor. Robots and computer programs can perform work faster than humans, and with fewer errors. Technology can improve supply chain processes as well, finding solutions for things like reducing the cost of shipping raw materials.

To choose the right program or service for you, ask yourself the following questions:

  • What aspects of my business am I highly skilled at and don’t require any automation? (E.g., if you have a background in design, you wouldn’t need software to help you with graphic design.)
  • What tasks do I find myself spending an excessive amount of time on every week?
  • If I could take one of my most repetitive, time-consuming tasks off my plate, what would it be?

Answers to these questions will give you a clear indication of which aspects of your business you should automate with software. 

Find a freelancer

Outsourcing your human resource needs or IT department is one thing, but what about tasks that need to be completed infrequently? Freelancers can fill the gap for roles in your business that aren’t needed all the time. 

For infrequent on-demand needs, having a full-time employee doesn’t make sense:

  • Example: If you only need to consult with a web designer twice a year, or want to triple the size of your customer support team just during the holiday season, freelancers are a great solution. 

They increase your operating costs through insurance, paid time off, and payroll taxes. Businesses that need to scale up or scale down rapidly can take advantage of the growing pool of freelance workers available to work on a per-project basis while keeping costs down. 

There are plenty of online marketplaces that allow you to browse and hire freelancers from all over the world. Though, keep in mind that with freelancers, cheap isn’t always the best option. You’ll save money over time by paying someone more for higher quality work rather than paying a cheaper freelancer that continually disappoints. 

 Integrate an internship

Interns are a great way to lower costs. Interns are new to the job market and have a limited work history. They take on internships to gain real-world professional experience and learn valuable business skills. 

Your business benefits as well, because interns are paid less than a regular employee and have reduced employee benefits. In the intern/business relationship, everyone benefits. Internships also reduce recruitment costs. 

After an intern has proven they’re an asset to your organization, you can hire them without having to spend money searching for a qualified candidate. Because you already know this person and understand their abilities, there’s likely no need for an interview process or even training.

Harness virtual technology

Reduce business costs by operating in a virtual manner whenever possible.

  • Virtual meetings help minimize travel expenses and virtual offices can eliminate the need for physical space. While we certainly don’t want to eliminate personal contact altogether, save it for the instances when it’s most beneficial.
  • Technologies such as Google docs (soon to be Google Drive) or Basecamp centralize company documents and product collaboration as an alternative to paper documents and meetings.

 Narrow your focus

As a small business owner, I find narrowing my business focus to be one of the most effective strategies to improving my bottom line. By limiting the types of services I offer and projects I accept, I am more productive and produce higher-quality work.

Another way to narrow your business focus is to subcontract. Rather than turn away business, maximize your capacity by subcontracting pieces whenever possible. More projects equal more revenue, while subcontracting equals lower expenses. The result is a better bottom line.

Take Advantage of Discounts

Whether you realize it or not, a lot of the communities you are a part of offer some kinds of discounts on local and national businesses.

Local Discounts

I live in Philadelphia, and since I sold my car a few years ago I take public transportation regularly. Our public transportation system also has discounts on local businesses.

Some of these include restaurants, coffee shops, and even 2 for 1 baseball tickets. If you are in sales (which we all are, if we’re honest) and take clients out to dinner or the game to try and seal the deal, instead of paying full price for everything, why not use some of these discounts.

Now of course, you might not want to be super obvious about it, but in general you can save money on a lot of things you might not expect.

Alumni Discounts

I graduated from Arizona State University and know they offer discounts on all kinds of things for me as an alumni. Some of these benefits include:

  • Life insurance
  • Health insurance
  • Cell phone coverage discounts
  • Discounts on computers, cell phones, and cameras
  • Hotel discounts

Now these might not be huge discounts, but $50 here and there certainly adds up.

Chamber of Commerce/Local Networks

Being a part of a local organization, or a national organization at a local level can also introduce certain benefits to you. Some of these groups are the Chamber of Commerce, Sustainability networks, BNI, etc. Not all of them in every area will offer discounts on things, but some will.

I’d also check out your business credit card to see if there are any other discounts you can get.

Be smart about processing the payrolls

One of the critical measures a small business can take to cut operating expenses is to stop weekly payroll. Consider administrative and payroll processing costs. Especially if, like many small businesses, you don’t have an advanced payroll processing system.

We switched to a bi-weekly payroll reduced admin and processing costs by 40% and improved cash flow. Additionally, we outsourced our payroll services so that employees responsible for it could focus on more profitable tasks. We trained them to take care of customer queries, nurture leads, and participate in other revenue-generating activities for our business.

Buy Used Equipment

Yes, refurbished computers are a thing – and I’m quite positive that’s what I’ll be getting next. You can save a couple hundred bucks, and the company has made the machine just like new.

Generally, the only difference between a new and refurbished item is the price and some cosmetic differences that happen from previous use. I think the only thing to pay attention to here is making sure you’re buying something that is “certified refurbished” to make sure you’re getting a good quality item.



Reducing the operating costs is not a one-time job. This is an ongoing process that never ends. Your best chance at running a lucrative business is to become smarter in balancing your operating budget. As you see, small changes can make huge difference in business.


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