"A simple fact is... the time to save money is when you have some." - Joe Moore, best-selling author
In small business money seems to flow in the front door slowly and gush out the back door when no one is looking. Just where does all the money go each month?
Even if you have sales and profits your business could still be leaking money -and I mean real money. Many business owners are simply too busy focusing on the top-line sales to think about saving money on bottom-line profits. Big mistake. You can indeed save your way into profitability. And for businesses on the brink, this is often the best way.
For the rest of us whose business is happily humming along, there is less pressure to look at our costs. Often cutting costs is not a top-of-mind issue. You can't grow your business by cutting costs but it's better to launch a growth strategy from a solid balance sheet.
Cut and grow, or cut then grow; both approaches are fine. But not grow, grow, grow without a close eye on your profit margins, trends, and costs. According to Brian Tracy, renowned professional speaker and success expert, "a better way to express the idea of streamlining and cutting costs would be working smarter." I couldn't agree more. But how?
There are many ways to reduce your excess business expenses while you execute your business strategy. It's not one or the other. Implementing just a few cost cutting measures can make a big difference to your bottom line.
Here are seven quick wins in areas that are real profit killers. Other expenses that are covered by contracts such as space, vehicles, and telecomm are not included here.
1. Review all purchases in progress. Were you looking to upgrade your software, place a large order for supplies or materials, go on a trip, or add to your team? Before you sign on the dotted line, take a close look at the associated costs. Are you getting the best deal? Is the vendor willing to work with you if you are considering canceling an order? Three simple thoughts: i) Do you need to buy it at all, ii) in what quantity, and 3) now? Another perspective is to envision the expected benefits to you and to your clients before you commit the money. If the planned spending boosts revenues, it's generally a good thing. If it's adding to indirect costs, dive deeper and make your decision in the bright light of data.
2. Cancel unnecessary monthly services. Have you taken a close look lately at your bills for subscriptions, memberships, club dues, newspapers, catering, bottled water, recurring fees, web domains, and other silent costs that drip, drip, drip their way into your profit and loss statement? Even just $85 a month is more than $1,000 in a year. A closer look here can harvest thousands of dollars of savings in many businesses. Probably yours , too.
3. Collect on Accounts Receivable. If you're borrowing money while you wait for your customers to pay, you're paying excess interest. Explore ways to get that money in the door faster, consider deposits, retainers, financing options, and quick-pay discounts to keep the cash flowing as forecasted and reduce your excess interest expense. All the savings go straight to your bottom line.
4. Reduce on-site and off-site printing costs. Most users print too many pages of too many draft s before a document is ready to go. Recycling bins are overflowing everywhere; each draft with just one change. Save the massive printing for the final version, and then print only the number of copies you actually need. Adopt the print-on-demand philosophy for your business. Does it need to be in color? Every page? For commercial printers, explore cost-saving layouts and color combinations with multiple print shops. And order in advance for a potential discount; avoid rush jobs whenever you can.
5. Rent not buy for short-term needs. If you need more capacity, but only temporarily, look into renting extra equipment or working an extra shift rather than a big spend. And use caution when accepting and pricing special orders where you need special tools but only for a short time. If you assume that the orders will keep coming, you could be in a real bind committed to higher costs over the long term. The same goes with meeting space and special skills when the needs are temporary. Buy only what you need when you need it.
6. Sell what you don't use. If you have extra space, equipment, staff capacity, machine time, parking, or other assets there could be a buyer willing to pay for it. Then you can consolidate to cut your excess costs where it makes sense.
7. Think incentives for your team. Rather than factoring routine raises for highly-compensated team members, consider introducing incentive compensation schemes that provide generous rewards based on top performance. It's a win-win and a powerful motivator for the best members of your team. If payroll costs are way out of line, consider a shorter work week for lower-paid staff when sales volume is low.
The Bottom Line
What you don't know can hurt you and your bottom line. Look into these seven areas to jumpstart your thinking about cutting excess costs in your business. The best time to start is now; the sooner you start, the more profits you will enjoy. And you'll be in great shape to start the new year.
Where will you start to cut excess cost and boost your profits?