Your business’s recurring expenses add up to a significant portion of your budget. You can permanently reduce some of those costs by negotiating discounts and lower rates with service providers and suppliers.
When business slowdown or inflation affects small businesses, companies look for more and more ways to reduce discretionary spending. But the biggest expenses for most businesses aren’t discretionary or outright purchases. Next to labor costs, top costs are usually recurring expenses for a company’s goods and services. Thus, the key to the greatest cost reduction may be reducing or eliminating some of those recurring expenses.
Some ongoing costs that you definitely can’t do anything about. But if you try, you may be able to make some significant savings on expenses you didn’t think you could reduce. Although you may be hesitant to ask your suppliers for deals, the truth is that many business-to-business (B2B) companies expect their customers to bargain for prices.
Here are ways you can reduce your recurring costs and improve your bottom line.
Analyze your recurring expenses
Before you start negotiating a price cut, make sure you still need all the recurring services you’re paying for. Your needs for some products or services may have changed since you first entered into a contract.
For example, if you’ve laid off one or more employees and don’t plan to fill those positions soon, do you still need the same number of phone lines as before? If you’re charged each month for each row, call the utility and discard the lines you’re not using. Ask if they will redirect any incoming calls from skipped lines to one of the lines you are maintaining.
Audit your credit card statement to make sure you’re also catching all recurring charges you’re paying. You may incur certain subscriptions or other recurring charges for services you no longer need or need.
Ask service providers for a lower price
This is sometimes the quickest and easiest way to deduct recurring expenses for things like office phones, mobile phones, internet connections and other services. Often, these service providers will reduce their price when you ask.
Some have customer retention departments that deal with such requests on a regular basis and are empowered to offer discounts to retain customers. Also, they may have reduced their monthly fees from the time you started trading with them. They won’t offer you a lower price unless you ask.
To get started, check out the company’s website and see what their current advertised prices are, and if they’re less than the price you’re paying now. (Use in-private or incognito mode in your web browser to avoid seeing your regular login page.) Ask other business people in your area what they are paying for the same service. Lastly, check out competitive prices as well.
With that information, call customer service and tell them you’d like to talk to someone about reducing your costs.
Ask your landlord to reduce your rent
If your lease is coming up for renewal soon and there is a lot of vacant commercial space in your area, ask your landlord for a reduction in the rate on your lease. They may be willing to reduce the rent to keep you as the tenant.
If they won’t reduce your rent, shop around for a new place with a lower rent. Before making a decision, be sure to consider your cost to move the business to the new location.
If your lease is not up for renewal but your business is struggling, ask the landlord if they will give you a temporary pause on costs. If they like you as a tenant and there is no one to take your place, there is a chance they can give you at least temporary relief.
If your lease is not up for renewal, and the landlord doesn’t budge on the price, look at the lease you signed and see if it has an “out” clause. An “out” clause is an option in a lease that lets you get out of the lease if you notify your landlord in advance. Usually advance notice is 3 to 6 months. If you can get lower fares elsewhere, or even operate your business from home, consider taking advantage of the advance notice option.
Renegotiate merchant account provider fees
If you have been using the same merchant account provider for several years and your account is in good standing, contact them to have their fees reduced.
Before you call them, contact some other merchant providers to find out what they’ll charge for your business type and sales volume. If you have a high-volume business, reducing the fees you’re charged for processing credit cards can save you a significant amount of money each month.
Create an RFP for Major Purchases
Consider using the RFP to solicit major purchase offers. An RFP is a request for proposal. This is a formal document used to list your project requirements and solicit bids from vendors or service providers.
Many small businesses submit RFPs when trying to choose providers. Small and medium-sized businesses can send RFPs to marketing companies, technology developers or website designers. There are two benefits to using RFP. One, it makes you list and focus on the key requirements for the success of the project. Second, it ensures that you provide the same details to all potential vendors so that you are better able to compare their responses. Be sure to do some research on the cost of desired goods or services in your area, so you can approach the position with realistic expectations.
For best results, create a detailed document that provides information about your company and the project in question. The more information you can provide to sellers in advance, the more accurate your quotes will be. RFPs take time to put together, and these documents are best used for large purchases.
RELATED: How to Avoid Overpaying for Everyday Business Expenses
Change your ordering strategy
If sellers are not offering the prices you want, you may want to consider changing your overall ordering strategy. In many cases, small businesses can cut overall costs by either consolidating orders or breaking them down.
In general, consolidating orders and buying goods in bulk both increase your value to suppliers and increase your chances of getting a deal. After all, sellers also have cash flow problems. If you place a large order with a large initial deposit, the supplier may be willing to negotiate a cost per item with you. As an added benefit, it can also reduce your overall shipping cost.
As a precaution: Avoid buying in bulk for inventory that is likely to be expired or out of date. For best results, check with your sales department and accounting team before buying in bulk. You don’t want to tie up needed cash for other purchases or dispose of items you can no longer sell.
Change your payment strategy
If you typically pay your bills at the last minute, you may want to reconsider this strategy. Some suppliers offer discounts to customers who pay within a short period of time. For example, they may offer a 2% discount for payments made within 10 days. This may be written on your invoices as 2/10 net 30.
Another option: If you usually pay by credit card, ask if the seller will give you a discount if you pay by check. The seller may be willing to do so because they will save the fee that the merchant account company charges them on purchases. (Make sure if you pay with a cash-back credit card you’ll get an amount higher than the discount amount.) And, of course, avoid paying bills late, as doing so can result in additional fees and charges. Fines may apply. Which makes your total cost skyrocket.
create competition among vendors
You may be hesitant to tell your current paper supplier that you are shopping for a new vendor. However, creating some healthy competition is a good way to keep costs down. In fact, when a supplier knows you are pursuing other options, it is more likely to offer you the best possible deal – even if it is not stated on the website.
If the seller of your choice won’t work with you on the price, shop for another vendor. Depending on what you need, you may be able to find multiple suppliers. Sometimes the most competitive prices for certain items (like paper goods, for example) may be at a local wholesale club like Costco or Sam’s Club. If so, you can save on the cost of supplies and shipping. In small quantities at first to make sure the new supplier actually meets your standards.
renegotiate credit card
Few small businesses have enough cash available to purchase all of their products and services outright. As a result, small and medium-sized businesses often stop charging some of their expenses with credit cards. Unfortunately, choosing the wrong credit card company can lead to high interest rates that skyrocket your debt level.
If you’re a good customer who pays bills on time, chances are good that your card company will want to keep you. Before contacting your card carrier, take the time to collect offers from other cards. You can also research balance transfer services to see what options are available to you. Then, call your carrier and ask to speak with a supervisor about the position. Tell them you’re thinking of changing card companies, and they may be willing to negotiate terms, rates, and even payment amounts to retain you as a customer.
RELATED: How to Choose the Best Credit Card for Your Business?
ask for other perks
Sometimes sellers simply refuse to lower their prices. In these cases, small businesses may wish to request other perks, such as faster shipping, longer product warranties, and lower down-payments. You can often work out an agreement that is beneficial to both parties – all you have to do is ask.
Remember: Most suppliers would prefer to negotiate with you rather than lose you completely as a customer. Follow the above tips to keep your business black in the long run.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax or accounting advice. If you have specific questions about any of these topics, seek the advice of a licensed professional.