4 Easy Ways Businesses Can Reduce Operating Costs

how to save on operating expenses small business

Whether your business is a brand new venture or you’ve been up and running for years already, you’re likely on the lookout to reduce your business’s operating costs as much as possible.

A common fear is that large-scale, dramatic change is necessary to really put a dent in your operating costs. 

Fortunately, there’s a lot you can do to save money and lower your regular monthly expenses that won’t have a jarring impact on your operations.

Streamlining your current processes, and even replacing some of them or introducing new ways of working—it’s an approach that doesn’t have to feel like turning off one switch and switching on another. Making smaller, progressive changes is actually more likely to work—and you’re more likely to stick with changes in the long term if you roll them out incrementally.  

Here are a few cost-cutting areas to start. 

1. Lower your energy bills and consumption

Energy isn’t cheap, that much is clear—but it’s a necessary expenditure when you’re running a business, and impossible to cut out completely. Whether you’re running one small office or an entire warehouse, you will no doubt have lighting, equipment, and appliances to power.

Fortunately, it is more than possible to reduce the amount of money your business might spend each month on gas and electricity. In fact, it’s actually pretty easy.

It’s possible that your business isn’t currently getting the best possible rate. Start with getting in touch with either your current energy company or an energy switching service to find out if you really are getting the best deal. Another possible cost-cutting measure for some businesses might be to adjust your schedule so that you’re using less electricity during peak hours. 

Also, consider your overall energy efficiency. Replacing your old fluorescent or even incandescent bulbs for LEDs, and upgrading to more energy-efficient equipment and appliances (which offer the same level of performance) are just two of the simple ways you can save your company from spending hundreds of what would otherwise be profitable dollars on unnecessarily high energy bills. 

You might find that you have to spend money to save money by improving energy efficiency. Putting together a simple forecast that shows what you spend on utilities each month and how much you project you can save through upgrades will help you see how long it will take you to start realizing cost savings.

2. Review your insurance policy

Reviewing your business insurance package or policies that your business has in place could potentially save yourself hundreds of dollars each year—or even each month, depending on your needs.

It’s entirely possible that you opted for a policy or package which, by default, includes coverage for certain incidences that don’t necessarily apply to your industry or particular business. You might even find that you’re paying out for an entire policy that you don’t need.

Take the time to talk to an expert business insurance broker. Explain your business’s particular circumstances and identify the coverage your company actually needs, and then have a bespoke package created which reflects this. This means that you then only pay for the insurance you need, and none of the coverage you don’t, which could considerably shave down your monthly insurance bills. Don’t skimp on coverage so much that you open yourself up to unnecessary risk and liability—just don’t pay for coverages that your business doesn’t need. 

View our Business Management Guide today!

3. Refine your recruiting and HR processes

It’s no secret that people are the largest expense for many companies. Hiring, recruiting, and retaining your staff is a big investment, not to mention ancillary costs like managing payroll and listing your position on third-party jobs boards. 

There are a few different ways to control costs in this area. A huge time-saver can be outsourcing repetitive, cumbersome tasks like managing payroll to a company that specializes in that work. At the very least, getting out of Excel spreadsheets and using an app-based tool can help you create better record-keeping systems, and can remove some of the risks of human error—not to mention the time you can save automating repetitive tasks. 

Every business is unique, and at some point in your business’s growth, you might find that you save money by bringing all your HR functions in-house. As you calculate possible scenarios, be sure to include the time you or your team are spending handling the repetitive tasks and the salary costs associated with that time. And don’t forget to factor in the infrastructure costs of hiring someone full time, including benefits. You might find that hiring for an HR “generalist” role is a good first step, so you have someone on your team helping with recruiting and compliance, as well as things like payroll. 

Finally, when it’s time to post a new position, think carefully about the costs associated with advertising a new position. You might find you can save money that you’d otherwise spend on mega-job posting sites if you spend a little time finding (potentially smaller) job boards that are geared toward exactly the type of candidate you’re looking for. For example, if you’re looking to fill a marketing role, looking for job boards associated with marketing associations or societies might be a more fruitful avenue than blasting the posting on a site like Monster or Indeed. 

4. Invest in your online presence through digital marketing

Advertising your business is a significant area of expenditure. After all, if people don’t know about your business, how can they purchase a product or service from you?

The trouble is, marketing can seem like it is perhaps too expensive at times. But, as with virtually anything in the business world, there are ways that you can make this process much less costly without compromising effectiveness—namely, by putting the majority of your efforts into online marketing.

Whether you outsource your online marketing services to an agency, take a more hands-on approach and do it yourself, or start building your own in-house marketing team, there are many efficient and cost-effective methods for you to put your brand on the map and engage with customers.

Starting with your website, compare costs for hosting and for services like offering an online store within your site. Pay attention to your site’s metrics: your number of visitors, referrals (or where your visitors are coming from), and your conversion rate—the folks who make a purchase while on your site. If you’re not sure where to get that information, start with Google Analytics

From there, look at the structure of your website itself, and how visitors make their way through it. This article on optimizing your site (for Strategic Advisors, but the advice is spot on for every business with a website) is a great guide to getting started. 

The best thing you can do to save money on digital marketing is to first make sure your efforts are geared toward your target market. First, who is your target market? If your answer is “everyone,” go back to the drawing board. You can waste a lot of money and effort if you’re not sure who your ideal customer is. Putting together a buyer persona will help you focus in on the specific types of messaging and advertising that will appeal to the right people.  

From there, focus on your web metrics. Before you spend money on a marketing campaign, outline your key performance indicators: the metrics you want to affect. Maybe it’s visitors to your site. Maybe it’s the number of people who make a purchase. Maybe it’s increasing conversions or even repeat customers. If you do outsource work to a marketing agency, or decide to invest in an internal marketing role, plot out costs versus benefits before you sign on the dotted line. 

When you’re looking to trim items from your marketing budget, start with the ones that don’t contribute to your primary business goals. If your investment in Facebook advertising has resulted in 20,000 new followers but can’t be attributed to any new business, pay attention to that discrepancy. Maybe it’s time to refocus the campaign, or maybe you’d get a better return on investment from putting those marketing dollars elsewhere. 

The key to saving money on costs is reviewing them regularly. Think about setting up a monthly or quarterly budget review meeting as part of your regular business plan review. You might even incorporate a SWOT analysis into your review once or twice a year. New insights and changes in strategic direction will undoubtedly have an impact on where you’re spending money and how much.

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Kim Whitley

Kim Whitley is a savings enthusiast and writer for Make It Cheaper. Follow her on Twitter for regular updates on her biggest passions: the business world, the energy industry, and the environment.

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How to Open a Successful Hair Salon

how to open a hair salon

If your dream is to open a hair salon, now might be one of the best times to do it. According to Zion Market Research, the salon industry is growing steadily and is projected to continue growing. They estimate that the global spa and beauty salon market should reach approximately 190.81 billion USD in 2024. In the U.S. alone, the salon industry is estimated to be worth $47.1 billion, and the market size is expected to increase by 1.5 percent in 2019.

If you are planning to start a hair salon, this guide will give you the details you need to get started. Plus, we’ve asked two salon owners to offer some tips to get your shop up and running.

Dallas Alleman, the owner of Salon Du Beau Monde in New Orleans, and Avi Shenkar, the owner of Philadelphia-based BLO/OUT, have different backgrounds and different business models, but share similar strategies for success.

Alleman has a 40-year history in the salon business, as both a licensed cosmetologist and an instructor. He has opened three salons in New York, Santa Fe, and New Orleans, and his current endeavor is a high-end boutique salon that offers all the traditional services.

Shenkar, on the other hand, is an entrepreneur with business experience, but no salon background. However, he has opened two BLO/OUT locations in Philadelphia and is working on three other locations. 

While they may run different types of salons, many of their tips for success are the same. 

It’s important to have a plan in place before you open your salon. Here are a few things you’ll want to do before you open:

Create a business plan

No business can function properly without a business plan. A business plan acts like a roadmap, a document that will guide your business to success. 

But, business planning doesn’t have to be a long drawn out process. In fact, you’ve probably already put together a lot of the information mentally, or even scribbled a few notes on paper. The point of a solid business plan is to figure out what your business is, how it will be successful, and how you’ll troubleshoot problems.

Our article on How to Write a Business Plan is a good starting point if you need a formal business plan, and if you’re looking for a faster, lightweight planning option, check out our guide to Lean Planning. You can also download our free business plan template, and take a look at our salon industry sample business plans to see how other salons have approached the process. If you’d rather not start from scratch, you can also try LivePlan, our business planning software.

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Figure out funding

Whether you’re seeking a traditional bank loan or borrowing money from friends and family, you need to figure out how much money you need to get started, and where it will be coming from. 

Most likely, you’ll be doing a combination of multiple funding methods, and you may be using your own money and bootstrapping your business. Regardless of what route you take, it’s important to have a clear idea at the outset of where the money is coming from. Our funding guide gives an overview of your options if you aren’t yet sure what funding options are right for your salon.

Find a mentor

As you’re planning your business, it’s a great time to find a business mentor. It’s best to find someone in the salon industry that can answer questions for you as you start and grow your business.

Put an accounting and inventory program in place

To keep track of your money and project growth, you’ll want to implement an accounting and inventory program. 

On the accounting side, you’ll need a program to track your revenue and expenses. You’ll also need to figure out how you’ll pay Uncle Sam, so it’s a good idea to sit down and chat with an accountant to help you get started.

You’ll also need a way to track inventory; Salon Today has some great tips on this particular topic.

Hunt for the right location

Choosing the right location is the difference between success and failure, Shenkar says. He admits that if he could go back and pick a location for his first salon, he probably wouldn’t pick the same spot. 

You want to select a spot with good traffic, high visibility, and is located where your target demographic shops or lives. Shenkar advises being fussy about your location, as it’s vital to the success of your salon.

Aside from touring around various locations with a realtor, Alleman suggests driving through the areas that you want to be located in and look for vacant properties. Just because there isn’t a “for sale” sign in the window doesn’t mean it’s not available. In his experience, people sometimes hang on to a property for sentimental reasons and are willing to rent it out if the right opportunity comes along. It never hurts to call and ask the owner if an arrangement can be made.

You don’t just want the right storefront—you want the whole package, says Shenkar. So, do your homework. Know the demographics, the local competitors, and think about how your customers will get to your salon. Is there ample parking? Is a construction project planned on your block? You want to know everything you can about the area before you select a location.

With the planning stages complete, you’ll move on to the nitty-gritty details of actually opening your salon.

Build your salon brand around the clientele you want

Before you start painting the walls and picking out furniture, make sure that your brand vision matches the kind of clientele you want to attract. According to Alleman, this is one of the most important lessons he has learned.

“You want your customers to feel comfortable in your salon, so make it a place they want to visit,” he says.

This means taking what you know about your target market, and working to create a brand for your salon based on their interests, tastes, and habits. Don’t overlook the importance of building a brand for your salon; the idea of “branding” might feel like something only big businesses do, but it’s necessary to tailor your look to your intended client base, and creating a brand is a key part of that process.

Provide excellent customer service

After you’ve created an environment that your clients will love, you have to follow through by offering excellent customer service.

“Provide an experience for your customers, not just a service,” Shenkar says. “The overall experience is what keeps customers coming back.”

Consider thinking through your customer service strategy early on, including hiring for emotional intelligence, rather than just skill set. And, you may want to look into tools to help you deliver better customer service, like a shared inbox tool to manage inquiries and booking requests

Set aside money for marketing

To be successful, you need clients. To attract clients, you need a solid marketing plan. Alleman suggests setting aside some money to market your business; without it, you’ll struggle to be able to really execute a marketing strategy. 

Create an attractive, well-thought-out website

For starters, you need a good website. Alleman suggests hiring a professional to create your site if you can afford it. That said, if you’re tight on cash, there are plenty of DIY website platforms out there. Your site should be attractive, easy to navigate, and ideally include helpful information for your customers, such as hours, location, contact info, and pricing. As most salons use an online booking system nowadays, that’s also an important element to look into (or you may lose customers to salons who do offer this convenience). 

When designing your website, it’s important to return to your brand vision and what you’ve learned about your target market. Your site is an extension of your brand, so it should be cohesive and match the image you want your salon to present to customers. 

If you’re building your website yourself, check out our guide to building a website.

Find creative, low-cost marketing ideas

You want to get the word out about your salon, and getting involved in your community is a great way to do that. Consider hosting an event like a ribbon cutting or a small charity event to attract more customers—for example, sponsor a school play or have the staff volunteer at a local baseball game. 

For more marketing strategies that can be relatively low-cost and will help you build your presence within your local community, check out our article on how to attract customers for your opening day

Set up and utilize social media accounts

Social media is an important component to your marketing plan, Shenkar says. 

If you wish to set up accounts on a variety of platforms, it’s not a bad idea to do so. However, make sure you can confidently say whether or not your target market uses the platforms, and that you have the bandwidth to post content on multiple platforms before you commit. 

At a minimum, it’s a good idea to build your presence on Instagram, as it lends itself well to a visual business. Start by getting a sense of what hashtags are popular within your niche and creating a content strategy, as well as following other local businesses and encouraging your customers to tag your salon when they visit. 

Don’t assume product lines will generate huge revenue

As an owner, you’ll need to select a product line. There are lots of options to choose from; while some shop owners sell a variety of product lines, Alleman advises against it.

“I find that choosing one brand to work with is less confusing for the client and the staff,” he says.

Some shops sell a lot of product, but Alleman says you shouldn’t look at it as a big revenue source. You’ll spend money up front to buy inventory, and even though you’ll sell it at a price to make a profit, that money usually goes right back into purchasing more product. So, it’s smart to consider starting small, and perhaps focusing on one product line in the beginning.

Once you’ve thought through all the details of how to open your salon to the public, you’ll turn your attention to how to grow your business. Here are some areas you’ll want to keep in mind. 

Hire staff based on personality

When you’re first starting out, you might be the only employee. But hopefully, your shop will be so popular that you’ll need to hire additional help, as well as bring on more stylists. When that happens, Alleman suggests hiring someone based more on personality than skill.

“I don’t hire for talent—I can teach a new hire the skills I want, but I can’t train someone to love and nurture my clients,” he says.

You want your clients to enjoy coming in. Of course, you want someone who is good at what they do, but you shouldn’t base your decision on skills alone. Personality matters.

Plan for finding new customers and retaining them

When a customer finds a stylist he or she likes, they usually become repeat clients. However, this doesn’t mean you should let up on your marketing efforts. Even if you have a steady stream of customers, you should build on the marketing efforts that you’re already using.

“I don’t believe in depending on any kind of business,” Shenkar says. “New client acquisition should be a full-time job and should never be overlooked. Contentment will kill a salon.”

Revisit your business plan regularly

A business plan should always be viewed as a work in progress. With each passing month, you learn more about your business and your customer base. 

It’s a good idea to go back to your plan, read it over, and make sure you’re still on track. A monthly plan review meeting can be helpful, as can running a SWOT analysis on your business. 

Look for ways to save on overhead

When you first open your doors, you may have splurged on a few things that you thought you needed, but really don’t. With your business established, review your inventory and see if you can make any changes or cuts to save money. Take a look at your monthly expenses too—is there anything you can trim back or get rid of? Maybe you can downgrade your internet service, or cut back on the amount of product you’re buying each month.

Opening a salon is a bold endeavor. As with any new venture, it’s important to plan as much as you can and be willing to adapt as you learn what works best for your business. You’ll spend a lot of time and money to get your salon off the ground, but Alleman says there is nothing like running a sought-after, successful salon.

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Lisa Furgison

Lisa Furgison is a journalist with a decade of experience in all facets of media.

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