The Forgotten Costs of Operating a Business (and how to eliminate them)

Exeter is full of thriving businesses, both big and small. According to official statistics posted by Exeter City Council, there are 4,877 thriving businesses and approximately 35,000 people commute to the area on a daily basis. These businesses - like all businesses across the UK - face the major challenge of operating costs.

Operating costs are defined as the expenses associated with managing and continuing to operate a business, from operating a device to the upkeep of a facility and even sales and marketing costs. In other words, it is all the money a business has to spend just to keep the business going. These operating costs are no small figure, either.

Research from American Express reveals that small and medium enterprises (SMEs) in the UK spend on average £1 million a year on these fees. In fact, the study, which was created in cooperation with the Centre for Economics and Business Research, found that SMEs with 50 or more employees spent on average of £3 million.

Why is Cutting These Operating Costs So Important?

It goes without saying that business owners would prefer not to spend so much on operating costs. The rate of operating costs could be the difference between a thriving and successful business or one that runs out of money before the fiscal year has ended.

A study commissioned by Geniac revealed that the average UK business spends £22,756 in its first year and this figure includes general administration and legal costs. With businesses pinched so much just to get up and running, bringing these operating costs down is vital. And, although some operating costs are entirely necessary, there are plenty of ways in which business can cut them in order to benefit their bottom line.

What Does it Cost to Set Up Business Premises?

According to Lloyds Bank, the average cost of starting a new business is £12,000 and property is described as the “single largest contributor” to this figure, accounting for more 25% (more than £3,000). As such, it makes a lot of sense to focus on property as a place to reduce expenses.

One possible idea is to consider letting employees work from home. For service-based businesses, such as companies that offer writing, accounting, and consultancy based work to their clients, ditching the workplace altogether makes sense. Instead of paying to rent out a massive office space to accommodate all of your enthusiastic employees, encourage them to do their work from home, without even getting out of their pajamas or leaving bed to do so! More than four million people in the UK already work from home, supported with cloud-based software that lets teams collaborate on projects and improved local infrastructure such as faster internet - so that may be something to consider.

If you’re a business that simply cannot give up its premises, such as a manufacturer, then there are still ways to save money on your premises. One area you can look at are your energy costs, comparing different energy suppliers, what they offer, what you need, and their different tariffs in order to make sure that you’re getting the best price. Businesses often joke about having to work to “keep the lights on” but, by looking at energy suppliers on websites such as Business Electricity Prices, you can quite literally make it cheaper to keep the lights on. Other services and tariffs worth comparing include your telecom rates (what you pay for phone and internet) and the cost of the software that you use (e.g payroll, accounting, and file-keeping) to ensure that you aren’t paying more than you need to.

If you’re planning to relocate, expand or just set up your first business location, you’ll also want to consider areas that are being redeveloped or will be redeveloped in the near future. These areas may be seen as undesirable but they’ll be much cheaper and the growth potential in that area could increase foot traffic).

How to Hire Employees Without Breaking the Bank

A major problem faced by SMEs especially is hiring employees. You need a passionate and committed workforce to help get your business off the ground, but how do you find those prospective employees without breaking the bank? The average cost to hire a new employee is £5,000, including working with hiring agencies, sifting through applications, conducting interviews, and so on. But, surely, there must be a more affordable way?

The first thing you’ll want to do to reduce this cost is to use your existing network. Assuming that you’ve already made contacts with those in your industry, you can reach out to these people to see if they know of anyone who needs work or is looking for a new and interesting project. The fact that a candidate has been recommended by someone in your industry should be a brilliant sign.

You could also look at higher education institutes and hire graduates. While graduates may have less experience, they are willing to learn and will work hard as they learn the ropes of your industry. They’re also easy to find - you can just contact the university! While different business will want to look at different universities, known for different things, it should be noted that the University of Exeter is rated quite highly, is known for its very high research output and excellent student satisfaction so you may want to look locally before you consider universities further afield.

No one goes into business expecting it to be cheap. Entrepreneurs far and wide, across many industries, have discussed bootstrapping (scrimping and saving to fund a new business) and business loans exist for a reason. But that doesn’t mean that every aspect of your company should be a bank-busting endeavor, nor should you have to fire people or fret about how you’re going to make ends meet. Looking at smart and savvy ways to bring down your business’ operational costs makes far more sense, so use the suggestions above to lower those costs.