As seen in The Wall Street Journal.

Just about every small business can use a little extra cash flow these days.

Nancy F. Koehn, an entrepreneurial historian at the Harvard Business School, says owners commonly look to boost their bottom line by laying off staff. But this isn't always a wise a strategy because it can mean losing out on opportunities to service new customers, she warns.

"If demand picks up, you can't exploit it because you don't have the resources," says Ms. Koehn. "It's a really big risk."

The good news is that layoffs aren't a business owner's only option for saving. Here are three best ways to lower operating expenses:

1. Consolidate your workspace. If your business is run out of more than one rented office, consider consolidating the next time a lease expires. Not only will you save on real-estate costs but also utilities, cleaning services and other regular expenses. Business owner Jaki Baskow says she did this in November 2009 when the lease expired for one of two Las Vegas offices her 19 employees had occupied. Now the staff at Baskow & Associates LLC, a provider of event and meeting-management-services, works out of just one building. "We reworked the space to fit everybody comfortably," says Ms. Baskow. For example, part of the reception area was trimmed so a nearby conference room could be enlarged, she says. As result, the company eliminated roughly $5,000 in monthly expenses.

If you operate out of one location, but want to reduce overhead, consider sharing work spaces through "co-working" arrangements. If you're a small enough operation, or a solo entrepreneur, you might shave costs even more by moving to a home-based office.

2. Shop smarter. Small changes to your company's buying habits can make a big difference to your bottom line. For example, you could start comparing prices on supplies and services, which might then give you more muscle in negotiating with vendors. "You price shop to find the best deal for your company and you negotiate," says Vanetta Chesbro Wilson, co-owner of Chesbro Music Co., a music-instruments wholesaler in Idaho Falls, Idaho. "Everything's negotiable." Last year, Ms. Chesbro Wilson says she did this and found a more efficient brand of light bulbs that's now saving Chesbro Music about 10% to 15% a month in utility expenses. And she estimates the firm cut its overall operating expenses by 19% last year compared with 2008 using this strategy.

You might also consider selling or auctioning off equipment, furniture, computers or machinery you no longer use.

3. Rework your work force. Consider tapping freelancers in lieu of staff employees. Sites such as, and—which cost little or nothing to access—feature databases of freelancers from around the globe whose expertise range from accounting and sales to customer service and copywriting, and not just Web-related fields. Robert Tilley Jr., owner of industrial-supply company SafeTek USA LLC, says he's hired a patent attorney, mechanical engineer, several Web programmers and administrative professionals all through Odesk since launching his Jacksonville, Fla., firm in 2005. "Other companies are laying off people and can't do the things they need to do to grow," says Mr. Tilley. "A dream team of experts helped me build my company."

Another option: Instead of retaining an outside agency to handle certain tasks for your business, bring a single in-house person on board. Last year, Crisafulli Bros. Plumbing & Heating Contractors Inc. terminated its relationship with a marketing agency to avoid paying a hefty monthly retainer, says co-owner Andrea Crisafulli Russo. The Albany, N.Y., mechanical-services company then hired a "really sharp" marketing coordinator for half the cost to handle most of its advertising and public-relations responsibilities, she says. For the rest, Crisafulli Bros. still taps an outside marketing firm but only on an as-needed basis, adds Ms. Crisafulli Russo.