Reducing operating costs is paramount for any business. Improving the operating costs of your commercial property also means putting yourself ahead of your competition. Owners should always be looking for ways to reduce their operating costs but the key is to do so without sacrificing the quality.
So, what are the best ways to reduce operating costs? In this blog post, we will share five strategies that can help you reduce the operating costs of your commercial property and enable you to reduce overhead and generate more revenue.
1. Determine What You Are Paying For
Itemize every expense related to your individual buildings and determine what you’re paying annually. Look at what you’ve paid for expenses such as utilities, property insurance, and repairs over the last few years. You’ll see a pattern in these numbers. Some expenses, such as a water bill, should remain fairly consistent year-over-year while others will be more variable. Identify which expenses are increasing and make efforts to reduce them. For example, maybe the contract with your janitorial company expired and the rates went up a year ago. It’s worth contacting the company to renegotiate a more favorable rate.
2. Identify and Offload Unnecessary Services
Next, identify services that you’re no longer using or are just unnecessary expenses for your commercial property. How can you tell which expenses are necessary and which ones aren’t? Well, necessary expenses either make you money or differentiate your business (and property) from the competition. If you’re not using them, they are not improving your operating income. Cutting unnecessary costs is crucial in reducing overhead.
On a similar note, you can also simply reduce services that are not needed on a regular basis to decrease your operating expenses. Review your vendor contracts and identify any services that may not be needed, for example, on a monthly basis and try quarterly servicing instead.
3. Shop Around for Better Rates
Another way to cut operating costs is to reach out to several vendors and request bids for desired projects and services. Once the vendors provide service costs to you, you can then compare these rates against each other as well as your current expenses to ensure you are getting the best price for that service. It’s extremely important to compile an accurate scope of work for vendors, as missing information or added complexity can significantly affect the quoted rate. Having an accurate quote can allow you to better plan for anticipated operating expenses.
4. Explore Opportunities to Make Your Buildings Sustainable
In other words, go green! There are many options to capitalize on alternative energy sources and green buildings, including LEED certifications. Replacing regular light bulbs with compact fluorescent lighting, improving your insulation and windows, and cutting back on the amount of physical waste are also great ways to reduce energy usage and will also save on utility costs.
As you build or acquire new commercial properties in the future, try making them as environmentally friendly as possible. For instance, solar panels and green roofs require an upfront investment, but that cost pays off in the long run in the form of reduced operating costs.
5. Minimize Repairs with Preventative Maintenance
Essential equipment like HVAC, fire and safety systems, and elevators need regular maintenance and inspections to catch problems early and avoid extensive repairs and interruptions to your tenants. Whether you own a shopping center, office building, restaurant, or retail store, failing to invest in maintenance now will cost you in the long run. As an owner, you want to do your best to ensure your investment is protected. Doing so reduces the number of emergency repairs, minimizes labor costs, and extends the life of your equipment.
Final Thoughts
Minimizing operating costs is crucial for any business, as long as the quality of service provided is not comprised. If you’re looking for ways to lower your operating expenses effectively, the strategies we’ve provided above will help you do just that.
