Growing a business comes with a variety of logistical challenges, from hiring new team members, to finding new suppliers, to expanding your workspace. The biggest challenge, however, is coming up with the capital you need to manage these changes.
There are three different ways to free up capital for growth: increase revenue, get financing, or cut costs. Raising revenue is the entire purpose of pursuing growth in the first place, and financing might not be enough, especially for businesses that have already leveraged most of their assets. Because of this, driving growth often means cutting costs, and restructuring to build a leaner growth-oriented organisation. Of course, this also comes with an element of risk, and businesses who aren’t discerning in exactly how they cut costs can easily find themselves in hot water even as they try to expand. To reduce costs while also expanding, businesses need to make targeted and strategic changes.
Providing permanent workspace for every employee is one of the biggest costs of any business. Employees, for their part, typically lose hours every day to commuting to and from work. Modern technology makes these inefficiencies glaringly unnecessary. While it’s certainly important to have some specific people in the office from time to time, it’s usually an enormous waste of resources to require everyone to appear in the same location daily.
Many office workers today communicate almost exclusively via email or other technological means even if they are sitting within speaking distance of one another. Allowing workers to telecommute has little direct effect on their work, and can greatly reduce the amount of space and resources a business needs to commit to providing a large working environment. Moreover, it can allow businesses to hire new employees without being forced to acquire additional office space.
Cut unnecessary tools
Over time, even carefully administered businesses acquire a variety of unnecessary costs. Most often, these take the form of redundant software subscriptions or marketing tools. For larger businesses, these costs often don’t account for a very significant portion of their budget. SMEs, however, stand to benefit significantly from periodically reviewing these types of tools to determine whether they’re being used, and whether they’re worth keeping around.
Cut meetings down to size
Meetings are a financial drain of epidemic proportions in the business world. The average office worker spends a full day every week in meetings. Managers spend nearly 50% of each workday in meetings, whether they’re leading them or attending. This is a problem, mainly because most of that time is completely wasted. Meetings can and need to be kept relatively short, because many attendees won’t be able to retain much after the first 15-30 minutes anyway.
By scheduling typical hour-long time slots, businesses are reliably wasting 30 minutes per employee per meeting. By slashing meeting lengths to a maximum of 30 minutes, a business with 50 employees can free up 200 man-hours per week, or 10% of their total labour resources. That’s equivalent to hiring 5 additional workers at no additional cost.
It can feel practical to have access to your own in-house graphic designer or SEO manager, but small businesses often don’t supply enough work to justify hiring their own personnel. It’s far more efficient to hire a third-party contractor to manage these tasks until your business grows to a point where it’s worth it to bring someone on full-time.
Reduce transfer fees
If your business regularly does business internationally, you may be losing major portions of your revenue to money transfer fees. Banks and traditional financial institutions typically charge 3%-7% for international exchanges, which can quickly cut into your profit margins. Even if you’re not currently operating internationally, these fees can represent a significant barrier.
Fortunately, that’s a problem that can be addressed fairly easily. Specialised foreign exchange services like HiFX, Transferwise, and others allow businesses to send and receive international payments for heavily reduced or no fees.
What not to cut
All of these changes are fundamentally structural ways to facilitate growth and free up capital. They don’t inherently affect the quality of your product or service. A business that’s looking to grow needs to work to limit cost cutting measures to ways that don’t also compromise their growth potential. Aggressively hunting for cheaper suppliers, cutting wages, or modifying your product to reduce costs can have serious negative effects on your business in the future.
Cost-cutting measures can facilitate growth in a number of ways, not just by freeing up capital. By taking strategic and informed measures, your businesses can reduce the amount of space you need, increase the amount of labour you have access to, reduce labour costs, and free up funds for growth.