Small-to-medium enterprises (SMEs) are the lifeblood of Australian business, with approximately 96 per cent of all private businesses in the country fitting into this category.
Bank of America recently published its semi-annual report on SMEs in the US, showing just how hard the typical small business owner works. According to the findings, 33 per cent of small business owners have never given themselves a raise or have not done so in the last 5 years, and 85 per cent work more than 40 hours a week.
It’s also not uncommon for the owner to put business costs on a personal credit card, or to take out a personal loan to boost funds.
A lot of the time, all this hard work and personal sacrifice comes down to one thing – money. There just never seems to be enough of it, so when the company isn’t bringing in the ideal level of funds, try these five tips to cut down on the outgoing expenses.
Corporate travel is an expensive business, with the industry already having reached an annual global spend of US$1.1 trillion in 2013 – a number only expected to rise.
Add to this the fact that Australia is one of the most expensive locations for corporate travel in the world, and it makes this practise for SMEs a costly one.
Accommodation itself comprises a large part of this expenditure. Hotel room rates often cost hundreds per night for a basic offering, but as Pricenomics shows, there are options to cut these costs in half without compromising on quality. In a price comparison of hotel rooms and options from Airbnb, the site found that an entire apartment on Airbnb was 21.2 per cent cheaper than a hotel room, and renting a simple room on Airbnb could save 49.5 per cent.
Booking flights regularly costs in the hundreds, especially because it is often left until last minute. For the cheapest fare, you should be aiming to book almost two months in advance, as after that point, the price of a flight increases exponentially.
Of course, avoiding travel unless absolutely necessary can save all of these costs. If it’s possible to hold meetings via Skype or other online technologies, it may pay to opt for these options whenever possible.
The cloud has been in the forecast for businesses around the world for years, and there is now a huge amount of real data on exactly how this technology can benefit businesses large and small.
A 2013 survey completed by cloud computing company Rackspace reported that the technology created an average cost reduction of 23 per cent, with 66 per cent of companies confirming that cloud computing reduced their IT costs.
A further 49 per cent of companies said cloud computing had allowed them to ‘punch above their weight’ to compete with the bigger companies – something all SMEs can aspire to.
3. Staff costs
Employee wages are often the biggest cost for any business, and one that is often seen as non-negotiable. However, there are a few ways to help minimise these expenses.
Employee turnover can be incredibly costly, a phenomenon that costs Australian businesses a total of about $83 billion annually. While some turnover is unavoidable, Insync Surveys have found that as much as 80 per cent of turnover is under an employer’s control.
In 2014, the Australian Benefits Review (ABR) found that companies with effective staff benefits plans had a lower turnover rate of 12 per cent, compared to the market average of 15 per cent. This indicates that making efforts to hold on to your staff could save you some expenses caused by turnover.
Another way to lessen staffing expenses is to look at any jobs that could be performed on a freelance, contract or temporary basis. By only paying for the work that needs done on an hourly rate, you save on paying a full salary. Check out more on how to get the most out of freelancers.
Finally, instead of the traditional payrise, you may be able to thank your staff with non-traditional benefits, such as the option to work from home, take unpaid voluntary leave or choose their own hours.
4. Physical workspaces
With the rise of technology and new ways of doing business, the need for brick-and-mortar office space is no longer what it once was.
American Express took a survey of 750 SMEs and found that on average, 4.6 per cent of a company’s expenses went to rent, which was the third biggest expense of any SME.
There are certain ways to get around those costs, if not at least cut them down a little.
Hot desking is the trend whereby employees essentially time-share a piece of office space, such as a desk or work station. They may work at different hours of the day, allowing the cost of that space to be covered by two employees instead of the usual one.
Another option is to let employees work from home, a trend now known as teleworking. According to Global Workplace Analytics, two-thirds of people want to work from home, and over a third of people would take this option over a pay rise. The same source suggests that six out of ten employers see cost savings via teleworking.
5. Energy and waste costs
When UK energy company Carbon Trust researched attitudes towards power savings in local businesses, it found that companies could save as much as £300 million every year through energy savings and waste reduction.
One of the driving factors behind this was the fact that while 92 per cent of people make an effort to keep energy costs down at home, only 47 per cent consider this expense in the workplace.
On top of that, only a quarter (23 per cent) of employees had been asked by their boss to make an effort to keep energy costs down, and only 22 per cent felt they knew how to make power savings while at work.
Here in Australia, the Australian Industry Group reports that 27 per cent of companies surveyed in an energy research project spent the equivalent of 2 per cent of their sales revenue on energy, and 7 per cent spent the equivalent of 5 per cent.
The same AI survey found that of the actions taken by companies in recent years to improve energy efficiency and reduce costs, almost half reported making changes to staff practices.