Instinctively, many business owners rush directly to plans for raising revenues to increase profits. They bypass serious cost-cutting as just a notion that can’t really yield a meaningful margin increase. Many view cutting services as the only alternative that can reduce spending enough to widen their profit margin. But, smaller trimming of expenses across all possible categories can often not only improve overall management efficiency, it can also significantly increase cash flow.
Below are some proven cost-cutting ideas that apply to commercial pavement sweeping companies as well as any other small business:
1. Cut energy waste.
Even at home, you can save a lot of money by reducing electricity and gas consumption. In a business, the opportunities to save are multiplied by the building sizes, the numbers of people using them, and the numbers and sizes of equipment types. To cut monthly utilities costs significantly:
- Eliminate unneeded electrical devices.
- Replace inefficient appliances, lighting fixtures, and wasteful outmoded bulbs.
- Apply weather-stripping and caulk around shop and office doors and windows.
- Audit walls and roofs for R-values, and correct major waste in these areas.
- Add blinds or shutters, and/or plant trees, to shade windows from direct sunlight.
- Install timers to turn off lights in copy rooms, restrooms, and other spaces not in use.
Sweeper and other vehicle fuel expenses can make or break a commercial pavement sweeping business. Cutting waste in this area can save many thousands of dollars monthly for an average-sized operation. See the annual NAS fuel cost update and follow that list of recommendations, including these examples to slash runaway fuel costs:
- Keep the engines tuned up.
- Don’t run auxiliary engines while driving between accounts.
- Use dust control products to enable carrying less water.
- Change fuel filters.
- Design routes efficiently.
- Dump waste water, vs. carrying it longer distances.
- Turn off the engine while parked instead of letting it idle.
- Use a cardlock to prevent the risk of fuel theft.
- Maintain fuel injectors.
- Convert to propane.
2. Outsource tasks when it’s cheaper than in-house.
Outsourcing many business services has become a popular cost-cutting alternative across the small business sub-sector over the past decade. Consider outsourcing recruiting, onboarding, benefits management, other HR tasks, bookkeeping, accounting, payroll, IT systems management, housekeeping, building maintenance, and other departmental roles. Use contractors for short-term projects or more permanent part-time work. For start-up sweeping operations, you may benefit from online virtual assistant services, local mechanics shops, etc.
3. Approach your vendors for added value.
Working with reliable vendors that you know and trust matters to small business owners. However, over time, there may become too much room to improve the value you are receiving in many of their products or services. Vendors typically do not offer long-time customers discounts unless they are directly asked to do so. Be prepared to switch vendors if your current supplier can no longer offer a comparable value to their competitors.
4. Reduce your interest costs on credit accounts.
Apply for extended terms for loan repayments and reduced interest charges where possible. Take the necessary steps to raise your credit rating as required to qualify for lower interest rates. Change lenders by asking competitors to buy your existing loans for your current loan providers. Ask your local SBA representative for information on the best local resources to reduce your debt-carrying costs. Switch to credit cards that offer lower rates and discounts on purchases.
5. Utilize workspace more efficiently.
If you are heating and cooling, insuring, furnishing, cleaning, and maintaining workspaces and storages that are underutilized, reconfigure your interior spaces to eliminate wasted square footage. In shop buildings, storages, and office spaces with high ceilings or inefficient energy use, seek to reduce cubic feet of unnecessary space.
6. Transition to cloud platform alternatives.
Use cloud computing to cut IT costs. Scale services seamlessly and only pay for applications and the amount of use you actually need and only when you need it. Eliminate the high costs of subscriptions to software suites that only contain a few applications you need. Instead of ordering custom software, look into the growing abundance of easy-to-use open-source software configuration alternatives that a clever in-house employee might be able to use to create the programs you need.
7. Minimize inventory carrying costs.
Scrutinize your parts inventory management results to identify areas for cost-cutting. Reduce the number of less frequently replaced parts you’re keeping on hand. Shop for better pricing on inventory items and vehicle maintenance products. Also, evaluate your shipping arrangements to see if there are cost-cutting opportunities there.
8. Close unprofitable revenue channels.
Take a hard look at revenue sources that are not producing enough to justify their costs in time and/or money. Realizing the need to eliminate a service or product that is causing a net loss is as or more important than implementing new channels. Eliminating unprofitable activities and inventories opens possibilities for using the recovered operating funds and paid employee time once spent on that losing channel for more worthwhile propositions.
9. Switch to remote work as appropriate.
Conduct a needs analysis to determine how much you may save by altering workplace arrangements for both administrative and field employees. Do they all really need to come into the office every day? If your business can save significantly by allowing some employees to work remotely, try it. Working from home has been shown to bolster productivity and cut turnover by as much as 50 percent, per a large research study conducted by Stanford University (Inc. magazine).
10. Go deeper with cost-cutting.
Deeper cost-cutting may be needed, for example, in payroll, which accounts for a staggering average of 60 percent of operating costs in the U.S. American businesses. Even bravely examining and eliminating customer accounts to eliminate unprofitable services provided to some or cutting accounts can leave a sweeping company operating leaner and more sustainably over time.
TIP: Don’t Cut Off Marketing!
In tight economic times, many small business owners instinctively slash marketing from their budgets. They see it as an obvious go-to area for cutting an avoidable expense, vs. a critical investment in revenue generation. But, of course, to increase profits, generating more revenue in tough financial periods is key. So, keep perspective. After all, other business managers and owners are looking for ways to save and add value just as you are during tight economic times. Focus on creative marketing strategies to show your market that the best value is in using your services.
Increasing Profits by Reducing Expenses
Instead of reacting to economic challenges by raising prices, slashing services, and/or eliminating products, first determine how much additional cash flow you need to operate well. Evaluate the above and other cost-cutting methods to calculate how much of that gap you can close by cutting operating expenses without impacting services or quality. Combining cost-cutting with carefully raising prices and/or discontinuing unprofitable service or product offerings is often the most practical and least painful approach to increasing profit margins.
Inc. magazine report on Stanford research of productivity and attrition rates due to remote work: https://www.inc.com/scott-mautz/a-2-year-stanford-study-shows-astonishing-productivity-boost-of-working-from-home.html