4 Ways Small Business Owners Can Save Money: Part 1 – Labor


In this next blog series, I am going to be reviewing four common areas of your business that can be draining money unnecessarily. It can be easy to slip into cruise control in these areas because they are such integral parts of your business. But when you step back and evaluate, there are often small adjustments you can make that will have big long term effects.


The first area I am going to look at is labor. There is no one size fits all business model…that is the beauty of small business! You went into business for you and what you offer is unique. There are however common pitfalls and questions that can help you to think through these areas, tighten things up, make appropriate adjustments and have your business running smoothly!


Labor Cost:


When it comes to spending money, it is easy to approach everything from the “spend less” approach. This is most likely one of the highest costs you will incur on a monthly basis in your business. It is important to value it as one of your greatest assets. While you may be able to cut back in some areas, you will always need a quality team to help run your business.


That being said, consider these things as you evaluate this expense in your business:


Incentives and benefits:

  • Are you spending money on things that aren’t being utilized or are going to waste? — Think gym memberships or unpopular lunches. Little things add up, especially through the course of a year. Cut or redirect funds that are going to under-utilized perks.
  • Are you incentivizing where it counts? — Wait, what? Didn’t we just say to cut this? BUT you know your team. To avoid turnovers, invest in things that WILL boost your team morale and motivate your team to work hard! Provide both opportunity and team spirit.



  • Turnover can end up costing you much more than it would to take the time to invest in solid training and creating employees that last.
  • Systematize! Streamlining your systems will often pinpoint inefficiencies and help your whole team to function at their best. Make sure you think through each aspect of your operation and have a written guide of expectations. This gives your employees confidence in performing their best and ensures that you can monitor waste and time usage.


Staff Mix:

  • Evaluate your senior level or salaried employees versus your hourly employees. Where is the most efficiency coming from? (Think work accomplished, sales brought in, etc. versus cost of payroll.) Chances are you need both. But often you can adjust how many senior levels staff you have versus how much you are using hourly employees to create a more cost effective combination.
  • How much do you need to increase your sales in order to meet your quarterly sales goals? Make sure to take this into consideration as you evaluate your staff mix. Will you have the proper support to handle the push to increase and then the workload when you reach your goals? It is always much more costly to have to make staff decisions reactively as opposed to having a plan in place, already worked into your budget.


While cost effectiveness is a MUST in order to keep your business moving forward, efficiency and quality are your goals. Think first about how you can value your team and invest into them so that they can provide you with your greatest return. When your team is functioning efficiently, customers are happy and returning and you aren’t having to waste money on turnover.


When you look at your staff strengths and efficiencies, there may in fact be areas where you can cut back and save cash immediately but more than likely, this area is a long term investment. You will see great returns as you take time to systematize, train and value your team.


Tune in next week, we will look at your Cost of Goods Sold!



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