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20 Cost-Cutting Tips to Reduce Your Business Expenses

Running a business is never without its costs, but it’s important to avoid the unnecessary ones. This guide presents ways to reduce your business expenses without sacrificing growth and the quality of your work.

Businesses frequently face situations that call for a reduction in costs. This may come about as a result of external factors beyond your control (e.g. a downturn in the economy), or may simply become relevant following a regular budgetary review. It’s easy to get overwhelmed trying to decide where you can actually reduce business expenses without causing damage to your business. 

Cutting costs in business doesn’t have to be a pain point for you, your customers, or your employees if implemented thoughtfully and strategically. Below is a list of business cost-cutting ideas that will help you avoid needless spending without sacrificing too much, and get your business to a more stable financial state.

General Cost-Cutting Tips

1. Determine Needs vs. Nice-to-Haves

When looking at reducing costs, take a look at where your money is going first and foremost. What are you spending money on that is essential, and what is nice to have but not strictly necessary? Proper categorization and reduction of non-essential costs is the logical first step in a cost reduction strategy.

2. Revisit Utilities

It’s amazing how much money can get eaten up by large energy bills in an office space. Implementing everyday energy-saving practices can reduce utility bills significantly. Encourage employees to be more mindful of turning lights off when they leave a room, or shutting down computers at the end of the day. Set the thermostat to ease up on the cooling or heating during non-business hours. It’s also important to regularly review utility bills and ensure you are not getting overcharged. You may also shop around for better prices from alternative utility suppliers in your area.

3. Embrace Remote Work

Going a step beyond reducing spending on utilities, you may consider adopting a remote or hybrid business model. Having a physical location for your business isn’t always necessary, especially if work is primarily virtual. You could also downsize to a less expansive space and have employees work on a hybrid remote and in-office schedule.

4. Reduce Spending on Office Supplies

Especially if you take your team partially or fully remote, office supplies will become less of a necessity. Otherwise, embrace paperless methods and buy only what you and your team actually needs.


5. Get Active on Social Media

You don’t have to buy ad space to get the word out about your business. Social media marketing is a great tool for growing your online presence organically (read: for free). It’s also useful for learning more about your customers and connecting with them right where they already are!

6. Research Your Ideal Customer

This is the ultimate marketing method for working smarter, not harder. What good is spending thousands on an extensive ad campaign if it doesn’t appeal to a target audience ready to buy what you’re selling? Niche down your marketing focus to exactly who will convert when they discover your business. This way, each dollar spent on marketing will bring in high-quality leads.

7. Start Networking!

Word-of-mouth is still one of the best ways to get more exposure for your business—so start talking! Build relationships and connections within the right circles, and encourage others to share positive experiences with their friends and family to build natural buzz around what you offer.


8. Hire Contractors and Freelancers

Having a team of full-time employees can add up quickly and may not be the most sustainable method for your business. By bringing in contractors and freelance workers, you can pay by-project or by-the-hour instead of committing to covering full-time salaries. As an added bonus, contractors typically work remotely so you won’t have to provide a workspace for them!

9. Invest in Training, Not Experience

When you do need to hire W-2 employees, prioritize hiring teachable people over experienced people. Bringing in professionals with decades of industry experience may seem nice, but they’ll come with a much higher salary expectation. By focusing your efforts on employees who have potential and a readiness to learn, you can build people up into experts who grow alongside your business (and don’t cost an arm and a leg to hire).

10. Offer Performance-based Perks

Instead of giving annual or quarterly bonuses, offer bonuses as incentives for good performance. This will motivate employees to be more productive while saving you the expense of doling out bonuses expected by the entire team prior to the holidays, for example.

11. Optimize Meetings

It’s easy to get caught up in scheduling too many meetings that pull your team away from getting the actual nitty-gritty done. Limit the amount of time spent in meetings and make sure the meetings you do have are intentional, focused, and necessary. Less time wasted means higher productivity and focus on achieving business goals sooner.


12. Buy Second-hand or Lease

When newly outfitting your physical office space, browse the local second-hand market or search for office liquidation sales near you. You can save a ton by opting for good quality used office furniture over brand new desks and chairs, or even through leasing the equipment you need.

13. Use Open Source/Free Software

Almost any software you need to run your business has a free or open source option available. Rather than subscribing to an expensive CRM or project management software that does way more than you currently need, grow your business with a free option that gives you the essentials.

14. Bundle Purchases

When you do need to make an equipment or software purchase for your business, look for deals that bundle multiple tools together at a discounted price. 

15. Invest in Warranties

Office-grade printers are not cheap, so don’t get stuck buying a brand new one every time yours stops functioning properly. Spend a little bit now on a warranty to protect you from the costs of repairing or replacing essential equipment for your business.


16. Budget Consistently

The best way to save money for your business? Create a budget and stick to it. Track and record all income and expenses and adjust your budget accordingly. To make sure you never miss a transaction, use banking software with expense management and spending insights so you always know where you stand.

17. Forecast Sales and Expenses

Anticipate your cash flow by drawing up a sales forecast to analyze how your spending compares with your profit. To understand how your balance of income versus expenses compares to others in your industry, calculate your profit margin and compare to the profit margins of competitors.

18. Track Tax Write-Offs

Any time you spend money on your business, you should be writing it off as a tax deduction! This means you won’t have to pay taxes on the money used to pay for those expenses, ultimately saving you money come tax season. Track your write-offs with a spreadsheet or tracking tool to make sure you pay only what you actually owe for taxes.

19. Pay Your Taxes

If you don’t stay on top of your tax payments, you can easily end up overpaying or owing more in penalties later on. Set aside a percentage of your income each month so you’re ready when the taxman comes knocking. Our Tax Preparation software automates this process, enabling you to set aside a percentage of your income, so you arrive at tax season fully prepared to pay your taxes on time and in full.

20. Eliminate Unnecessary Fees

Whether it’s a software subscription, taxes, or a simple ATM fee, fees can creep up out of nowhere. By staying on top of your budget and accounting, unnecessary fees should never slip by unnoticed, so make sure you’re paying attention and eliminating practices or services that involve fees wherever possible. There are numerous tools available to help you run your business that also adopt a no hidden fees approach, so you won’t need to worry about getting blind-sided by unexpected expenses during the course of running your business.

What to Avoid When Cutting Costs in Business

Cutting costs is not something that should be done lightly. Cutting too much can have long-lasting negative impacts on your business. Be careful and attentive to where and how you reduce spending for your business. Make cost-cutting changes that you can sustain long-term that won’t adversely affect your business to the point of losing revenue. Perform a cost-benefit analysis when adopting cost-reduction measures, so you don’t end up hurting your business instead of helping. Cut out the chaff, but don’t throw the grain out with it!

Why Businesses are Cutting Costs

Businesses often cut costs due to inflation and uncertainty about the economy, but it’s also a healthy business practice for ensuring you don’t spend unnecessarily. By implementing some of these cost-cutting tips, you can reduce your business expenses and improve profitability, ultimately helping your business to grow more sustainably.

Business Cost-Cutting FAQs

How can a business reduce operating expenses?
What are other common ways to cut costs in business?

Written by

Hannah Donor is a freelance copywriter and social media strategist with 5+ years of experience helping small businesses authentically curate the written word to reach and inspire their target market.