It's important to ensure that your business is lean and efficient, particularly when economic conditions are difficult.
Even this early on in your business, you may have options to reduce your business costs by considering whether:
- any element of your business product or service can be removed
- there are cost-effective alternatives to high-cost elements
You may be able to make savings on your fixed costs (often called overheads), which you pay for regardless of how much you produce or sell. They include rent, rates and wages.
You may be able to make savings on your variable costs, which are linked to how much you produce or sell. Variable costs include materials, packaging, overtime and transport costs.
Choosing and managing your suppliers
To minimise your costs, you should manage relationships with suppliers effectively and assess their performance regularly. Being reliable in placing orders and paying on time will lead you to become a valuable customer. Drawing up a contract or service level agreement can ensure good service from them.
Your bank is also a supplier so try to minimise your banking costs and make sure you get the cheapest form of credit available.
Maintain a good relationship with your bank or other lender. Always try to be personally involved in dealings between your business and the lender.
For more information on starting up, read our guide on starting up: common mistakes and how to avoid them.