How to Control Operating Cost in Your Business


In business, the operating cost matters a lot. I’m sure I don’t have to tell you this, and you probably agonised over every single penny you spent in the infancy of your business. However, as the operation grows, and you have to worry about more and more factors, it becomes progressively harder to keep tabs on the amount of money you spend. Here, I’ve listed our best tips on reducing your costs as you scale your business.

Get Vendors to Fight over You

Make sure that your vendors that sell similar products know about each other, without rubbing their noses in it too much. When one vendor really feels the presence of a close competitor, you’ll be amazed by how much your pricing can improve in a short space of time. Even if you’re planning to stay with a certain vendor, the very fact that they know you’re in contact with their rivals can be enough to spark a big drop in their pricing. Let’s say you were running a construction firm, and looking to shave down costs on a bulk order like your hardwood crane mats. Call up your current vendor, and let them know that while you’d prefer to stay with them, you absolutely need to reduce costs. There’s no need to mention competitors directly; they’ll get the message!

Review Vendors Often

Building on that last tip, it’s important to carry out annual or semi-annual reviews on all of your key vendors, flagging all of your automatically renewing contracts to come up for a period of rebidding and review a couple of months before they’re due for renewal. This will ensure you don’t get looped into another long period of paying too much for the standard of products and service that you’re receiving. Even better, you can get rid of the boilerplate clauses from all your vendor’s contracts. Instead of getting by with automatic renewals, change the contract so that you have the option to renew it if you want, but have no actual obligation to.

Train your Sales Staff to Get Discounts

A brief course on negotiation teaching your sales team on how to get good discounts from vendors, followed up by ongoing, consistent recognition for team members who get those discounts, will pay off massively in terms of freeing up capital. In fact, there have been some businesses which have been able to slash their variable expenses by 5-10 percent simply by training their sales staff in bartering skills. This can mean freeing up massive amounts of capital, depending on the current state of your cash flow. If you find that your growth is limited by never having enough money to invest in big developments, then filling your workforce with ruthless negotiators could be the change you’ve been looking for. Whether you outsource it or arrange for some in-house negotiation training, talking down prices is a fine skill, and not something you can simply afford to wing!

If your business’s expenses are close to crippling you, make these tips a part of your future strategy!