Small business cost control: a practical guide for store owners

On this page

1. 1. Know where the money goes
2. 2. Start with what you pay for the goods you sell
3. 3. Schedule labor to match the traffic
4. 4. Read your card processing statement
5. 5. Cut energy waste
6. 6. Stop paying for shrink and waste
7. 7. Review insurance, rent and contracts every year
8. 8. Watch the small bills
9. 9. A monthly cost review in about an hour
10. 10. What not to cut
11. Where Advantage fits

Cost control is not cutting everything by the same amount. It is knowing where each dollar goes, finding the dollars that buy nothing, and protecting the ones that bring customers back. A clean store, a full cooler and a short line all cost money, and they are usually the last places to cut.

This guide is for an independent store owner. It starts with the numbers, works through the main costs one at a time, and ends with a monthly review you can run in about an hour.

Tax, labor and utility rules differ by state. Where this guide mentions a rule, check how it applies where you are, and talk big changes over with your accountant.

1. Know where the money goes

You cannot control a cost you cannot see. Start with a profit and loss statement for each month, broken into the same lines every time: sales, cost of goods, payroll, rent, utilities, card fees, insurance, repairs, supplies and everything else.

Keep the paperwork behind every line. The IRS says you must be able to prove certain elements of expenses to deduct them, so receipts, invoices and statements matter for taxes as well as for control.

Then sort your costs into two groups:

• Fixed costs stay about the same whatever you sell: rent, insurance, loan payments, salaried pay.
• Variable costs rise and fall with sales: the products you sell, card fees, hourly labor at busy times.

Why fixed costs matter so much

The SBA defines the break-even point as the point where total cost and total revenue are equal. To find yours, divide your monthly fixed costs by your average gross margin.

Example with made-up numbers: your fixed costs are $25,000 a month and you keep 30 cents of each sales dollar after paying for the product. You need about $83,333 in sales a month to break even. Cut $1,000 from your monthly fixed costs and the break-even sales fall by about $3,333. At a 30% margin, every dollar of fixed cost you remove saves you from having to sell about $3.33 more. Try your own numbers in our break-even calculator.

Set a budget and compare every month

Write down what each line should cost next month, based on last year and what you know is coming: a rent increase, a new hire, summer cooling. At the end of the month, put the real numbers beside the budget and look at the three biggest differences. A difference you can explain is fine. A difference nobody can explain is where to dig. If you want a second pair of eyes, the SBA’s local assistance network offers free or low-cost counseling.

2. Start with what you pay for the goods you sell

What you pay for your products changes with every invoice, so it needs a weekly habit, not a yearly review.

• Check every invoice against what arrived and the price you agreed to. Our article on catching vendor invoice mistakes has a routine you can follow.
• Pay only for what you ordered. The FTC warns that scammers send phony invoices made to look like real orders, and advises clear steps for approving purchases and invoices.
• Reprice when costs move. When a cost goes up and the shelf price does not, the margin quietly shrinks. Our article on price changes without surprises covers how to keep up.
• Ask for better terms. Ask vendors about volume pricing, delivery minimums, rebates and credits for damaged product, and get the answers in writing.
• Check whether an increase fits the market. The Bureau of Labor Statistics’ Producer Price Index measures the average change in the prices producers receive. USDA’s Food Price Outlook forecasts food price changes up to 18 months ahead. If a vendor’s increase is far above both, ask why.

Watch margin by department

Cost increases can arrive a few cents at a time, with no single bill to notice. They show up as a margin that slips. Example with made-up numbers: a grocery department sells $20,000 a month. Three vendors raise costs, the shelf prices stay put, and the department’s margin slips from 32% to 29%. That is $600 a month, or $7,200 a year, gone without a single new bill. Check margin by department every month, and look for the items behind any drop.

Early payment discounts

Some vendors offer a discount for paying early. Example with made-up terms: an invoice for $5,000 offers 2% off if paid in 10 days, otherwise the full amount is due in 30. Paying 20 days sooner, you pay $4,900 instead of $5,000. That is $100 earned on $4,900 in 20 days, which works out to about 37% over a year. Take the discount when your cash allows.

3. Schedule labor to match the traffic

Payroll is the cost you can adjust every week. Two numbers tell you how it is going: labor as a share of sales, and sales per labor hour. Our labor cost calculator works out both.

• Schedule by the hour. Put sales by hour next to the hours staffed. Trim the slow hours, and add help at the peaks where the line is long.
• Plan for overtime. Federal law requires overtime pay of at least time and a half for hours over 40 in a workweek, unless an employee is exempt. Where a state’s overtime law gives more, the employee gets the higher amount. Build the schedule so overtime is a choice, not a surprise.
• Cross-train. A clerk who can run the register, stock the cooler and receive a delivery covers more of the day.
• Keep good people. Hiring and training a replacement takes your time and your best staff’s time.

Example with made-up numbers: two clerks work from 2 p.m. to 4 p.m. on weekdays, and the register shows that one could handle the traffic. Taking one clerk off those hours, at $13 an hour, saves $130 a week, or about $6,760 a year. Make the change only if the line stays short and the store stays clean.

4. Read your card processing statement

The SBA notes that accepting cards means processing fees on every transaction, plus costs for any equipment. Card fees grow with your sales, so check them every month.

Divide the total fees on the statement by your total card sales. That is your effective rate. Example with made-up numbers: $1,150 in fees on $50,000 of card sales is an effective rate of 2.3%. Track it monthly. If it climbs and your mix of cards did not change, ask your processor why.

Questions worth asking your processor:

• How is my pricing built, and what is the markup over the card networks’ costs?
• What monthly, yearly and equipment fees do I pay, and what is each one for?
• Is my card terminal leased? What does it cost over the full lease?
• How long is the contract, does it renew on its own, and what does it cost to leave?

If you want to charge different prices for cash and card, check your state’s laws and your card network rules first, and ask your processor how it must be done.

5. Cut energy waste

Electricity prices vary a lot by place. The U.S. Energy Information Administration’s state electricity profiles show the 2024 average retail price, across all customers, ranging from under 8 cents per kilowatt-hour in North Dakota to 38 cents in Hawaii.

ENERGY STAR’s tips for convenience stores say refrigeration may use up to 40% of a store’s total energy, so start there:

• Clean the cooling coils on coolers and freezers.
• Check door seals. ENERGY STAR’s rule of thumb: if a dollar bill slides easily into the seal, have it adjusted.
• Keep cooler doors closed, and check temperature settings against ENERGY STAR’s guidance and your health department’s rules.
• Check the heating and cooling filter every month and change it at least every three months, and have the system tuned up once a year.
• Move to LED lighting, which ENERGY STAR says uses up to 90% less energy than incandescent lighting.

Ask your utility about rebates and rate plans before you replace equipment. ENERGY STAR notes that rebates may be available for certified refrigerators and freezers.

6. Stop paying for shrink and waste

Shrink is product you paid for and never sold. It never shows up as a bill, which is why it is easy to miss.

• Count your most-stolen and most expensive items on a schedule, and log every variance with its cause.
• Check deliveries before the driver leaves.
• Review voids, refunds and no-sale drawer openings every week. Our article on voids, no-sales and refunds explains what to look for.
• Record every item thrown away, and order perishables in smaller amounts more often.

Put shrink in sales terms to see what it really costs. Example with made-up numbers: $300 a month of shrink at cost, in a store with a 30% margin, takes $1,000 of extra sales just to earn back.

Our retail inventory management guide covers counts, reorder points and shrink step by step.

7. Review insurance, rent and contracts every year

These costs renew quietly, so put each renewal date on a calendar with a reminder 90 days ahead.

• Insurance. The SBA’s advice is to insure against things you could not pay for on your own, talk to agents about what coverage makes sense, then compare terms and prices.
• Rent. Know your renewal date and options, read every charge the landlord passes through, and start talking about renewal early.
• Service contracts. List every contract: software, phone and internet, alarm monitoring, waste hauling, pest control, equipment leases and card processing. For each, note the price, the renewal date, whether it renews on its own and how to cancel.
• Subscriptions. Cancel anything nobody has used in three months.

8. Watch the small bills

Small charges add up because nobody owns them.

• Bank fees: ask your bank for a statement of every fee you paid last year.
• Late fees and penalties: pay vendors and taxes on time, and set reminders for due dates.
• Delivery charges: combine small orders where the vendor charges by delivery.
• Store supplies: register paper, bags, cups and cleaning supplies, bought in sensible amounts and counted like stock.

9. A monthly cost review in about an hour

Line	What to check	What to do
Cost of goods	Gross margin by department against last month	Find the items whose cost rose and price did not
Payroll	Labor share and sales per labor hour	Adjust next month’s schedule hour by hour
Card fees	Effective rate	Ask the processor about any rise
Utilities	Usage against the same month last year	Check coolers, seals and settings
Shrink	Variances on counted items	Fix the cause that repeats
Contracts	Renewals in the next 90 days	Compare prices or cancel
Small bills	Bank, late and delivery fees	Remove one fee a month

Keep the review in the same sheet every month. The trend matters more than any single month.

10. What not to cut

Some costs pay for themselves in sales you never see on a report. Be careful with:

• Staff at your busiest hours.
• Cleaning, lighting and restrooms.
• Your best sellers, which should never run out.
• Cooler and freezer maintenance.
• Training on cash handling, ID checks and safety.

A cut that empties the store is not a saving.

Where Advantage fits

Advantage brings a store’s sales and costs together in one back office. Operating expenses are entered at the store or in the back office, and the income statement, payments statement and Accountant Report are built from your own sales, purchases and expenses, month by month and store by store. Vendor EDI invoices update item costs, and a daily e-mail lists the costs that changed, so you can check your prices. Each Shift Report shows the cash counted and the over or short. See expenses and reports, invoices and purchases and our labor cost calculator.