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Call Sales: +1 (833) 437-3835
Kristie Wright | June 7, 2023 |
The world of business is becoming increasingly saturated and competitive by the day. To be financially successful, restaurant and retail businesses need to find innovative ways to minimize their costs to bolster their net profit.
Many businesses make the mistake of drastically cutting costs which compromises the intrinsic value of their final product or service. This dilutes your business’ credibility and desirability and ultimately leads to reduced sales.
In this article, we’re sharing the seven best cost-cutting strategies for success. You can implement these ideas to increase your restaurant or retail profits without compromising on quality.
You may be wondering why our first strategy for cost-cutting is to invest. Isn’t the point to save and not spend more?
Sometimes, spending money up front saves your business more in the long run.
By investing in employee development, you’re bolstering internal skills and capacities. This ensures that your workforce can operate efficiently and accurately. Employee training boosts both productivity and morale. This circumvents the need for increased management or additional hiring and improves productivity, too.
Harnessing the expansive potential of technology is one of the most effective ways to cut business costs, especially when working in the restaurant or retail industry.
A particularly productive approach is utilizing cloud-based tools. One example of this type of tool is Revel’s cloud point of sale (POS) system. This online software offers an array of functions that will save your business both time and money.
Cloud-based software such as POS systems are highly time-efficient. They can automate processes which are then synced across a variety of would-be-separate administrative platforms. This capacity to automate tasks saves precious employee time, while eliminating the possibility of costly mistakes. It also makes data accessible from anywhere, allowing for greater control.
This technology is becoming more financially accessible every year, which means that utilizing cloud-based software is a no-brainer for businesses wanting to cut costs.
Every retailer or restaurant has its own unique energy requirements. If your business is involved in production processes, you’re probably particularly reliant on intensive electricity consumption. Electricity is a substantial monthly expense for any business and there are numerous ways to cut this cost.
The first step to cutting energy costs is ensuring that you purchase energy-efficient appliances or equipment. Naturally, if you’ve already invested in your business’ infrastructure, you cannot simply replace everything overnight. If this is the case, then be sure to replace an appliance or equipment with a more energy efficient counterpart when the time comes for the original to retire.
Encourage energy-saving habits in the workplace, such as powering off computers at the end of every day and only using lights when necessary. The adjustments may be small, but they make a substantial difference to your business costs in the long run.
If you're at a loss regarding where to cut back on energy, consider conducting an energy audit to identify areas for improvement.
This strategy is particularly prevalent for businesses that have long-standing relationships with suppliers. If you’ve been purchasing from the same supplier for a decade and you always pay your bills on time, you’re in a strong negotiating position.
You can start by exploring the possibility of reduced yearly increases. While this doesn’t immediately cut costs, it acts as a buffer against rising prices, which will save your business money for years to come. If this option is not available, you could speak to your suppliers about establishing long-term bulk order purchases for reduced costs.
If a supplier or vendor simply will not budge on their pricing structure, then it’s advisable to explore other options. You may discover that the grass is, in fact, greener on the other side. Or, perhaps your supplier will decide to accept your negotiating terms for fear of losing your valuable business.
Management is a crucial component of any successful business, as it ensures efficient operations. What many people neglect to consider is the possibility that they’re overspending on management.
The first step to cutting back on management costs is identifying which departments could reliably operate with less supervision. In many cases, utilizing POS-integrated tools like automated timesheets can keep employees on track in the same way a manager could. Plus, this type of system also streamlines payroll preparation, reducing the need for management in this sphere too.
Once you can comfortably minimize managerial hours you can renegotiate that portion of the budget and hopefully cut costs.
Many businesses try to do it all.
While this is certainly admirable, it’s highly recommended that you become comfortable outsourcing non-core functions to reliable external parties. This option affords your business access to the expertise for which you may not have an internal capacity. IT and marketing are typically the most outsourced departments. But there are many other roles that outsider businesses or freelancers can fulfill, too.
As we mentioned, outsourcing allows your business to leverage external expertise. This may sound like an expensive option, but maintaining internal capacity to perform non-core functions is often more costly to your business. Therefore, outsourcing is cheaper, and it allows your business to focus on its primary functions. This supports successful scaling-up as you have increased internal capacity, while also reducing overall expenditure.
This final strategy is aimed at restaurant or retail businesses that have already implemented a comprehensive set of strategies for cost-cutting. If your business is already operating at maximum efficiency on a tight budget, then you may want to consider consolidating incidental costs. This requires you to essentially take stock of leftover costs and identify ways to merge these items.
Some suggestions for consolidation include merging events across departments or synchronizing the use of external facilities. You will likely be shocked to discover just how much you can save by combining celebrations and training events.
That said, it’s important not to be too extreme with this.
Eliminating all celebrations could lead to employee resentment, which will negatively impact your retention rates. Employee appreciation is important, and expressing gratitude doesn’t have to make too much of a dent in your budget if you think creatively.
Furthermore, spending too little on training ultimately hinders the growth of internal capacity, which is also bad for your business in the long run.
In today’s crowded and competitive restaurant and retail marketplace, cost cutting is an effective strategy that every business can benefit from.
If you can implement these seven cost-cutting strategies you can save on expenses without compromising on quality. This will ensure that your profit margins increase and your business has the best chance of success.
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