You may be making a ton of sales every day – enough to bring in substantial profit for your business. But when you look at the numbers, you find that your actual revenue is only just enough to keep the business going. So what could be the reason behind this? You’ve done everything possible to get the sales you need, but you’re not seeing results in terms of profits.
This is likely because you’re spending too much money to run the business and get those sales in the first place. High operational costs are among the biggest reasons why there’s a drastic imbalance between your conversion rates and your profits. This isn’t a viable situation if you want to strive for consistent growth and eventually become an established brand.
In other words, you’ll need to spend less on running the business while still generating the kind of sales you need. So check out these five highly effective tips to decrease your operational costs:
1: Outsource Certain Business Functions
Having full-time staff can be expensive, especially if you have a startup or a small business. It can be equally expensive to set up entire departments for your backend operations. Outsourcing some of your business functions to freelancers or agencies can be a highly effective way to address this issue and minimize operational costs.
In fact, a Deloitte study found that the opportunity to cut costs is the main reason why most companies outsource their operations. This suggests that outsourcing can be a highly effective cost-cutting tool if you execute it properly.
Take IT, for instance. Do you really need to have an in-house IT team just in case something goes wrong? What if nothing goes wrong the entire year? You’ll just be paying them to come to the office and sit around in case they’re needed.
Of course, it’s good to have them available on call at all times but do you really need to set up an entire department just for that? Instead, you could have a third-party IT team on contract and call them on whenever their services are required.
Even for some of your operations such as marketing, you may not need an entire team of full-time workers. Depending on the size of your business, you might only need a single marketing expert to work full time. For special occasions like product launches or event-specific campaigns, you could bring in temporary marketing consultants to help your in-house expert.
Some industries may also need marketing only when they’re running a certain campaign or for a specific occasion. So, in that case, it won’t really make sense to have a team of full-time in-house marketers on payroll.
What if you could only pay them when they’re needed so you don’t have to pay ongoing fees just to have them around? This would involve working with an independent marketer or a marketing firm for a specific campaign. You’ll end up saving a ton in operational costs because you’re only spending money on services you need in the moment.
Leading companies like the Thomas Cook Group even managed to reduce back office costs by over 30% within just 18 months of outsourcing. Jardine Restaurant Group also improved cost efficiency by 50% through outsourcing.
Besides marketing and IT, you can also outsource many other functions depending on the unique needs of your business.
This includes aspects of your business such as:
- Content development. You can either work with a content development agency or find good freelancers through platforms like ClearVoice.
- Accounting and payroll. Deloitte is one of the leading service providers for this, though you can also use payroll management platforms like Deluxe Payroll.
- Customer service and support. CoSupport and SupportNinja are some of the leading providers.
- Human resources. TriNet is a leader in HR solutions for all business sizes and industries.
Some service providers may be able to cover multiple aspects of your business functions. For instance, some HR service providers may also be able to handle payroll. So look for the best options that will help you save money.
2: Use Chatbots to Deflect Customer Support Enquiries
It’s common knowledge that good customer service is critical for success. In fact, Zendesk found that 62% of B2B customers and 42% of B2C customers would buy more from a brand after receiving a good customer service experience.
However, it can be extremely expensive to maintain effective customer support channels. It costs money to maintain 24/7 availability for phone and live chat support. First of all, you have to factor in the cost of hiring additional staff to work in shifts. Otherwise, you’ll have a bunch of frustrated and overworked support staff who are in no position to provide quality customer care.
You also have to consider the additional cost of running your support operations like internet connectivity, phone service, electricity, support software, and more. Anyone with a clear idea of how much it costs to deliver a good customer support experience knows how much money and effort goes into it.
Deflecting some of your customer support enquiries to non-human-backed channels like chatbots can be highly effective for reducing cost. You can have chatbots providing basic level support and answering simple questions. This can significantly reduce the number of customer support calls and emails.
Gartner also found that organizations have been able to see a 70% reduction in enquiries through other channels after implementing chatbot technology. This means that your phone, live chat, and email support staff will be able to dedicate their attention to each customer and improve the quality of their experience.
The instant, 24/7 support from chatbots can also improve customer experience while minimizing costs. What’s even more impressive is that the deflection from other channels significantly brings down the cost. The Gartner study found that organizations that implemented chatbot technology were able to save 33% for every voice engagement.
However, you may worry that implementing chatbot technology will negatively impact the customer experience since you’re taking the human element out of it. That doesn’t have to be the case if you use chatbots powered by Artificial Intelligence.
These chatbots use natural language processing to understand the questions they receive, enabling them to deliver an appropriate, human-like response. They can learn through every interaction so they become more intuitive with their responses, which is crucial for delivering a good customer service experience.
Movistar, Latin America’s biggest telecommunications company, wanted to deliver a customer service experience that enabled people to avoid long waiting times and solve their issues without the need of a human agent. They implemented AgentBot from Aivo – an intelligent chatbot that humanizes the customer experience. This resulted in a 30% decrease in customer service costs while maintaining an 80% retention rate.
3. Maintain ADA Compliance
Unforeseen legal issues can result in a huge financial loss for your business and increase operational costs. One of the most common legal issues in recent times involves website ADA compliance. The American Disabilities Act requires businesses to ensure that their websites are easily accessible for people with disabilities.
If not, your business could face an expensive lawsuit that could have been easily avoided. In 2018 alone, federal courts saw 2,285 ADA website lawsuits – a 181% increase from 2017. We can expect to see a further increase in such lawsuits, putting non-compliant businesses at risk of serious financial loss.
So if you have a non-compliant website, you should work toward resolving that. Or if you’re planning to build a new website, make sure you work with an agency that knows how to build accessible sites. To ensure ADA compliance, you need to follow the Web Content Accessibility Guidelines (WCAG) and familiarize yourself with Section 508 of the Rehabilitation Act.
With that said, maintaining ADA compliance can be very expensive. An audit alone could cost you upwards of $1,500. So, businesses with limited finances may have a hard time addressing this legal risk. The good news is that there are more affordable options like accessiBe, which provides an automated, AI-powered solution for web accessibility.
This solution automatically scans your site for any accessibility issues and provides you with instant fixes. You can easily make content adjustments like font size and style changes, title emphasis, link emphasis, and more to ensure compliance without sacrificing design.
4 : Make the Most of Automation to Save Time
One of the biggest risks involved in reducing operational costs is that it could negatively impact service delivery. With a smaller team or a change in your existing process, you might spend more time than usual to do the same tasks. In some cases, the quality of work may also suffer. Automation can help prevent these challenges and even solve some of your existing productivity issues.
Invest in tools that can automate many of the processes that you are currently carrying out manually. You can find options to fully or partially automate functions like payroll, HR, marketing, procurement, invoicing, accounting, and more. For instance, you could invest in email marketing software that will automatically follow up on leads or constantly nurture leads on your behalf.
Automating these functions will free up time for your staff to work on more complex tasks that require human involvement. This increases productivity and improves cost savings for your business. In addition, automating these tasks will improve efficiency as it will minimize the risk of human error.
According to Adobe, the biggest reason why there’s a positive sentiment toward automation is because it saves time. And 54% of executives in a PwC study say that AI solutions have already helped increase productivity for their business.
Invesp even found that marketing automation reduces marketing overhead by 12.2%. In addition, 67% of respondents in a survey by LinkedIn Talent Solutions said that AI helps save time in recruitment.
It helps recruiters in sourcing and screening candidates, nurturing them, and scheduling interviews. 43% also said that AI removes human bias and 30% said it helps them save money.
There are plenty of automation tools available in the market for a number of tasks and processes. You’ll have to find ones that perfectly fit the needs and budget of your business.
5: Find More Cost-Effective Marketing Solutions
Marketing is another area where there might be opportunities to reduce costs. Although it is crucial for every business to invest in marketing , that doesn’t mean you’re investing in the right tactics. Some businesses may be relying on expensive marketing tactics that have extremely an high cost per action.
This isn’t very viable for a business that wants sustainable growth. You need to look around for more affordable marketing solutions that will still yield the desired results but bring down costs. This would require frequent testing of all the marketing campaigns and channels that you’re running to narrow down on the most effective options.
If you’ve been running search marketing ads for years, for example, you may want to test ads on other platforms like social media instead. Or if you’ve only been focusing on outbound marketing, maybe you want to start experimenting with inbound marketing.
In addition, social media marketing, micro-influencer marketing, and employee advocacy marketing may be a great option to reduce marketing costs. According to a Tomoson study, influencer marketing and email marketing are the most cost-effective methods to acquire customers online. Organic search comes next followed by paid search and display advertising.
Remarketing is another tactic that could possibly lower advertising costs and reduce your overall operational costs This involves retargeting people who have previously shown an interest in your products by visiting your site or clicking on your ad.
A Nabler case study found a 25.56% reduction in cost per conversion and an 88.5% increase in conversions through dynamic remarketing.
However, that does not mean you should start relying on these methods immediately. The impact of each method may vary by business type, industry, and so on. This makes it crucial to test out the various marketing solutions available and see which ones work best for you.
These are some of the most effective methods to reduce the operational costs for your business. But you shouldn’t just stop here. Keep looking for more opportunities to minimize costs by following operational best practices.
You could adopt “green” policies that prioritize eco-friendly and cost-effective practices. If it’s viable for your business, you could even set up a remote team to save on office space, equipment, and utilities.
Start with the steps we’ve highlighted here and work your way up from there. The more you can reduce operational costs using the right strategies, the higher your revenue will be.
What’s your favorite way to reduce business operational costs? Share your ideas in the comments below.
Latest posts by Shane Barker (see all)
- How to Use Personalization and Automation for Small Business Growth - November 25, 2019
- 5 of the Most Effective Ways to Reduce Business Operational Costs - October 9, 2019
- How to Drive Traffic through Organic and Paid Channels - August 1, 2019