7 ways to reduce fixed cost in your business

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A business’ fixed cost are those costs that do not change in relation to production. They include insurance, rent, loan payments, equipment leasing, advertising, banking fee and administrative salaries.

Here is how you can reduce the fixed cost for your business;

  • Install security systems measures that will cut on insurance

You can install security systems and sprinkler systems, this can help reduce your insurance premiums and hence a reduction in the insurance cost.

  • In terms of advertising, evaluate if you get your money’s worth

Consider much less expensive advertising media such as emails, text messages, flash sales and sidewalk adverts. These media target certain markets and can be more effective for the business.

  • Try to Reduce your rent

Negotiate for lower rent, sub-lease your space to another tenant who will share the rent or you could just look for a space the price per square meter is lower.

  • Reduce salaries

Labor cost is probably the greatest component of fixed cost for most businesses. Instead of hiring permanent workers, you could consider temporary hiring to increase the flexibility of the business to reduce staff whenever sales go down.

Outsourcing labor is also a good idea since you can easily negotiate for better deals with the outsourcing company.

  • Opt for free or cheaper technology

There are far more free products that earlier before, there are replacements of Microsoft email and word. Go for these products since they are easy to get and it does not cost your business maintenance.

  • Ask for lower repayment amounts per month on loans.

In case you have a monthly repayment plan on a loan to a bank, ask for a lower payment amount per month. You can also negotiate for a lower interest rate in order to lower your payment. It is also possible to negotiate for a longer term on repayment.

  • Opt for leasing or renting instead of buying.

This applies to machines and equipment as well as space. It is possible for you to negotiate for a lower interest rate with the leasing company. It is also very cheaper to lease equipment than to buy it.

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She is a student at the Technical University of Kenya. Loves fitness and adventure

1 Comment

  1. Nice tips on Business expenses optimization but there are some things on which we can not compromise like quality workforce which need a good salary package.