article 2018 When I acquired my first business in 2018, my top priority was making it profitable again. There are two main ways to achieve this: increase revenue or cut expenses, I had to do both. Since the business was barely making profit, I took a deep dive into its financials to take a look at unnecessary costs. At the time, it was only generating €25K in profit, and the quickest way to improve that was to reduce business expenses.
I started cutting costs because it was necessary to make the business profitable again. If i didn’t I wouldn’t have been able to sustain the business for more than a year.
But what if you’re a business owner whose company is already profitable? Ask yourself this question.
When was the last time you thoroughly reviewed your expenses?
- Do you have unused subscriptions eating into your budget?
- When was the last time you evaluated your marketing spend and its effectiveness?
- Are you overpaying for services that could be renegotiated?
This cost cutting strategy guide will help you identify and eliminate expensive or unnecessary expenses within your business.
H1: The Hidden Costs of Running a Business
Many business owners, especially those who have been operating for years, develop long relationships with suppliers and service providers. While this loyalty is valuable, it can also lead to complacency in cost management. Over time, expenses creep in unnoticed, slowly raising your business expenses every year.
Every January, when business slows down, I take the time to analyze the expenses from the previous year. This routine has helped me optimize my costs and keep my business financially healthy. Over time, I’ve developed a system that works incredibly well and now, I’m sharing it with you!
Cost cutting strategy for Turboclean
To illustrate this process, let’s take an example: TurboClean, a power washing company. TurboClean operates with four employees and one owner, last year they generated €400K in revenue and took home around €140K in profit.
By analyzing TurboClean’s financials, we can identify areas where they could cut business expenses and increase profitability, without sacrificing efficiency. Here’s how:
TurboClean’s Busy Year: More Revenue, same profit
TurboClean had its busiest year yet. Demand was getting more every year, and the company was running at full capacity. The owner, Dan (48), barely had time to get through the company financials, he was simply too busy running his business.
At the end of the year, he finally reviewed his numbers:
📈 Revenue was up by $20,000.
💰 Profit remained the same—$140,000.
⏳ Work hours: 60+ hours per week.
Dan had worked harder than ever, keeping customers satisfied and ensuring jobs got done. But then a question he saw the profit was the same while the revenue was up.
Where did all the extra money go?
- Did the cost of materials increase?
- Were services getting more expensive?
- Were there hidden business costs he had overlooked?
Dan took a deep dive into his business expenses, determined to find out the cost creep in his business expenses.
What he discovered shocked him.
How business expenses increase every year.
1. Supplier Costs Increase because of inflation
On December 21, 2023, Dan received an email from his detergent supplier:
“Due to inflation and raw material shortages, our prices will increase by 18.5% in 2024.”
Dan had been ordering $2,000 worth of supplies per month—totaling $24,000 annually.
New price: $28,440 per year (+$4,440).
He never questioned supplier price increases—until now.
2. Increase in rent
Dan’s business lease had increased by 8%, pushing his annual rent from $25,000 to $27,000.
Extra cost: $2,000 per year.
He tried negotiating with his landlord, even bluffing about relocating but the landlord didn’t budge.
- Increased marketing costs without higher return on investment (ROI)
In January, his Social Media Marketing Agency informed him: “Your monthly rate is increasing by 8%.”
Dan had been paying $12,000 per year.
New cost: $12,960 (+$960).
The worst part? His ads weren’t performing well, it had become scattergun marketing with no real strategy.
4. Overpaying for Outdated Phone & Internet Contracts
Dan had been on the same phone, internet, and utility contracts for 8 years. He never compared rates or looked for better deals.
Annual cost: $5,000 likely higher than it should be.
5. Accountant fees increasing every year
When Dan first hired an accountant, the rate was $400 per month.
Eight years later, the rate had slowly increased to $700 per month ($8,400 annually).
Dan never questioned it. Could automation have reduced costs? Was he overpaying?
6. Van Maintenance Contracts That Were Never Renegotiated
Dan relied on three work vans for daily operations.
Maintenance costs increased by 10% over the last five years—but he had never renegotiated his contract.
New cost: $5,280 per year (+$480).
Had his team really used that much maintenance? Or was he paying for services he didn’t fully use?
7. Insurance: Paying for Multiple separate policies
Dan had multiple separate insurance policies:
- Business Insurance
- Vehicle Insurance
- Liability Insurance
- Employee Insurance
Total cost: $9,600 per year.
Could bundling insurances under one insurer save money?
8. Old Subscriptions Still Charging Him
Dan discovered he was still paying for services he no longer used:
- WhatsApp button for his website: $12.50/month
- Old email & hosting plan: $12.50/month
- News subscriptions he didn’t read: $15/month
Total wasted: $480 per year.
He hadn’t used some of these services in 5 years!
9. High-Interest Business Loan Still Draining Profit
Dan still had an outstanding $21,000 loan from when he bought his work vans.
Interest rate: 6% → $1,200 per year just in interest payments. Loan payment was $ 7.000 per year.
He had the liquidity to pay off a chunk of it, but never considered the savings from reducing his debt faster.
Total business expenses per year
Dan’s total expenses increased from
$259,880 in 2023
to
$281,160 in 2024, reflecting an 8.2% rise in costs.
How to cut costs in your business
After an entire day of calling suppliers, service providers, and reviewing expenses, Dan had one goal in mind: Cut his business expenses and take care of the cost creep in his business.
First he had to consider, were these costs actually adding value to his business?
- Were suppliers charging fair rates, or had loyalty turned into complacency?
- Were services still effective, or had he been paying for nothing?
- Had some companies gradually increased prices without improving their services?
What Dan found changed the way he viewed his business finances forever.
Practical tips for Dan on saving business expenses
1. Saving money by switching suppliers
Dan requested quotations from different suppliers for the same materials.
Result? A competing supplier offered the exact same products for $3,000 less per year.
Dan asked his current supplier to match the price, but they refused.
So he switched. First $3,000 saved.
2. Trying to negotiate a lower rent
Dan attempted to renegotiate his lease, using a common tactic:
“I might relocate if we can’t find a better rate.” Unfortunately, the landlord didn’t budge, but at least Dan knew he had tried.
Savings: $0, but no increase either.
Lesson? You don’t always win negotiations, but you should always try.
3. Switching Marketing Agencies Saved $3,600
Dan analyzed his marketing conversion rates and realized something alarming:
His current marketing agency wasn’t delivering results. His advertising had turned into scattergun marketing. Expensive, but with no clear strategy and without result
Dan tried to negotiate but they weren’t flexible.
Solution: He switched agencies and built a new marketing strategy. All while saving $300 per month ($3,600 annually).
- Updating Phone & Internet Contracts
Dan had been paying old, overpriced rates for phone, internet, and utilities.
A few quick calls to other providers landed him a better deal, saving him $1,500 per year.
Lesson? If you haven’t renegotiated your contracts in years, you’re probably overpaying.
5. Automating your accounting software
A competing accountant reviewed Dan’s financial processes and immediately spotted inefficiencies.
“With automation, you could save at least five hours per week on admin.”
Not only that—he could handle Dan’s accounting for $400 per month, instead of $700.
Total savings:
$4,800 per year
5 hours per week saved
Dan’s options:
- Use those 5 hours to work and earn extra revenue
- Enjoy 5 extra hours of free time
6. Negotiating maintenance contracts
Dan’s vans had been well-maintained, his team took great care of them.
But maintenance costs had increased 10% over five years, even though repairs were minimal.
After renegotiating, he secured a better contract and saved $1,500 per year.
- Bundling insurance policies at the same insurer
Dan bundled his:
✔️ Business insurance
✔️ Vehicle insurance
✔️ Liability insurance
✔️ Employee insurance
The result? Lower rates and a $2,000 savings per year.
Lesson? Spreading insurance across multiple providers often means you’re overpaying.
- Reviewing old subscriptions
Dan realized he was still paying for services he hadn’t used in years.
Total savings from canceling outdated subscriptions: $480 per year.
Lesson? Small amounts add up fast.
9. Bank Loan Decision: Keep Paying the Minimum
Dan considered paying off his $20,000 loan but decided against it.
Instead of paying off the full amount, he chose to keep liquidity in his business.
He continued paying $1,200 per year in interest, but this gave him more cash flexibility for unexpected expenses.
Lesson? Sometimes, keeping a cash reserve is more valuable than being debt-free.
Total Savings: $16,880 Per Year + 5 Hours Per Week
After two days of cost-cutting, Dan had saved $16,880 annually.
But that’s not all. He also freed up 5 hours per week.
If Dan worked those 5 hours instead of wasting them on admin, at a rate of $50/hour, he could earn an extra $12,500 per year.
Alternatively, he could just work 5 hours less and enjoy more free time.
That’s Dan’s choice—but now, at least he HAS a choice.
Why is cost creep so expensive?
Dan felt great about his savings, but he also had mixed emotions.
Had he been overpaying for years without realizing it?
Let’s take a look at the numbers:
If he had reviewed expenses earlier, here’s how much he could have saved
After arranging all the business expenses Dan had mixed feelings about the whole ordeal. He had managed to save 16.880 dollars in just two days of work, but he had also been paying too much for all of his expenses for too long.
Had he taken a look through his finances Dan could have saved $67,520 over the last 4 years or $84,400 over the last 5 years just by reviewing and renegotiating his expenses annually.
If we also factor in the extra revenue potential from 5 hours of saved work per week (worth €12,500 per year), the total impact on his business could have been:
- €117,520 over 4 years
- €146,900 over 5 years
If we want to have the exact amount we would to have taken inflation into account but this shows how regularly reviewing business expenses isn’t just about saving money, it’s also about maximizing profitability and efficiency.
To make it easier, Dan could have an extra profit of 29.380 this year, bringing his profit to almost 170k
Why does your business need to adjust for inflation?
As Dan finished his cost-cutting analysis, something finally made sense.
Every supplier, service provider, and even his own employees had given or received a rate increase, except for him.
He had spent an entire day calculating how much more he was paying due to inflation, but he had never adjusted his own pricing to keep up.
Without hesitation, he sat down and began writing a message to his customers.
Subject: Important Update – Price Adjustment for 2024
Dear [Customer’s Name],
I hope this message finds you well. First and foremost, I want to express my sincere appreciation for your continued trust in TurboClean. Your support means everything to us, and we are committed to providing you with the highest quality service.
As you may know, inflation has impacted businesses across all industries, including ours. Over the past year, the costs of materials, equipment maintenance, fuel, and operational expenses have steadily increased. Additionally, we have provided well-deserved raises to our hardworking employees to ensure they continue delivering the excellent service you expect from us.
To continue offering the same high-quality service, reliability, and efficiency, we will be implementing a 7% price adjustment, effective [date].
This decision was not made lightly, but after careful consideration, it is necessary to maintain the quality and sustainability of our operations. We remain committed to fair pricing, transparency, and delivering the best value for your money.
If you have any questions or concerns regarding this change, please feel free to reach out. We truly appreciate your business and look forward to continuing to serve you in 2024 and beyond.
Best regards,
Dan “The Turboman”
Owner, TurboClean
The Impact of Dan’s Pricing Strategy
By implementing a 7% price increase, Dan immediately improved his revenue for the upcoming year.
Here’s how it changed his financials:
New revenue projection: $400,000 → $428,000
Reduced expenses: $281,160 → $264,480
New total profit: $163,520
Profit increase compared to last year: +16.8%
All without working harder just working smarter.
💡 How? Instead of only cutting costs, Dan also:
✔️ Increased his rates in line with inflation.
✔️ Used automation to reduce wasted hours.
✔️ Balanced his workload Dan worked 5 hours less because of his improved efficiency in his financial administration. He decided not to work the extra five free hours as his profit margins had already grown. He decided to take those five hours off and be home at work early on Friday afternoons.
Why Price Adjustments Matter for Business Growth
Of course, this is just an example. In reality, Dan would need to announce price adjustments months in advance and carefully plan contract renewals.
However, this case study proves an important point:
If you don’t review your expenses AND adjust your pricing, you’re slowly losing money.
5 Key Takeaways from Cost cutting in business: How to reduce business expenses and increase profitability
1. Cost Creep is Real, Small Increases Add Up Over Time
Many businesses lose profits due to gradual or unnoticed cost increases from suppliers, rent, marketing, and services. These small increased expenses accumulate and are reducing profit margins under the radar. Regularly taking a look at your business expenses is crucial to prevent cost creep.
2. Cutting Costs increases Profit Without Extra Work
Instead of focusing only on increasing revenue, reducing expenses can immediately improve the profitability of your business.
Dan saved $16,880 annually by:
✔ Switching suppliers for better rates
✔ Eliminating unused subscriptions
✔ Negotiating contracts for rent, insurance, and maintenance
Cost cutting strategies are even better than improving revenue because the impact is immediate.
3. Delaying Expense Reviews Costs You More in the Long Run
Because Dan was so busy, he didn’t take a look at his business expenses annually. This cost him over $67,520 in 4 years. Businesses that don’t track their expenses risk losing tens of thousands over time. Think about what happens if you run a company with multiple millions in revenue, you could lose hundreds of thousands!
- Adjust your prices with inflation
While Dan’s suppliers and service providers raised their prices, he never increased his own rates which decreased his profit margins.
A 7% price increase boosted his revenue with $28,000 without extra work. Businesses must adjust pricing to match rising operational costs otherwise the profitability of their business will take a big hit.
5. Financial Efficiency Creates More Time & Flexibility
Dan’s cost-cutting didn’t just save money, it freed up 5 hours per week by automating admin work. This gave him two valuable options:
✔ Reinvest those hours into revenue-generating activities
✔ Enjoy more free time and better work-life balance
Cost-cutting isn’t just about saving—it’s about working smarter, not harder.
