In an unstable economic system, when every penny counts, even the lowest reduction in expenses or increase in revenue can have an impact on your business’s profitability.
The good news is that a large-scale overhaul isn’t necessary to cut costs and increase the value of your business. It’s often ordinary, common-sense steps that can help improve your bottom line.
This article shows you where and how to cut costs while increasing your profits at the same time.
Review Your Production Costs
Most business owners will look first at the production processes, finding ways to minimize material and production costs while optimizing their resources.
To do so, you need to track and measure your business’s operational efficiency so you can adjust and optimize the use of your available resources. Consider setting performance parameters that reflect your efficiency goals.
You also need to get the most out of your production real estate. Consolidate or centralize the space for production. You can lease the unused space or use it for other major processes in your business.
You can try selling scrap materials like paper, cardboard, and metal instead of sending them to the recycling center. You can also consider ways to use production waste and create another product. Not only can this give you another source of profit but also establish sustainable practices for your business.
Reduce Paper Consumption
Your business can also benefit from reducing your paper use and transitioning to digital processes of sustainable practices.
While going 100% paperless, it may seem impractical in your current situation. You can save money by transforming several paper-heavy processes.
For instance, traditional faxing requires you to scan and transmit documents via telephone line to a recipient which prints them on paper. The receiver will have to print, sign, scan, and send back the documents.
By using e-Fax software, you can learn how to fax without a phone line, reduce paper waste with a traditional fax system and instead fax digital copies of documents on the web, an app, or email.
Another area where you can reduce your paper consumption is your billing and invoicing process. Invoicing software allows you to create digital invoices and bills for your clients and send them electronically. It doesn’t use paper, so it helps in reducing wastage, not to mention printing ink and postage cost used in traditional invoicing.
Reducing paper consumption means lower storage costs, fewer paper purchases, and greater efficiency. When you spend some time digitizing your paper processes, you’ll realize significant savings in the long run.
Cutting Down Supply Costs
In terms of wholesale supply costs, every penny saved is a penny earned. So, if you’re a business regularly making wholesale supply purchases, finding the best deal can make a significant difference to your bottom line.
It means that you need to monitor supply costs by searching for cheaper alternate sources or availing of discounts. While most people are embarrassed to ask for discounts, most businesses don’t mind offering discounted prices on their services and products, especially if you’re a regular buyer.
Paying your bills is one way to increase your chances of getting discounts and making yourself popular with other businesses or suppliers. Not only does it help you in building a good reputation for your supplier but, it also prevents credit card charges and late payment fees, which can add up to thousands of dollars annually. Some suppliers can even provide you discounts for early payments.
Another way to reduce your supply cost is "co-opetition". It involves searching for relevant businesses and pooling your resources to save money on goods and supplies.
Think About Your Financial Expenditures
Insurance is probably one of the most significant expenses no business can avoid. Without it, a lawsuit or an accident could put you out of business. With that said, it’s best to get business insurance that you can reasonably afford and need.
Talk with your insurance broker about all aspects of your coverage. You can ask them to shop around to get the best deal. There are surprising differences in rates from the same coverage by various insurance providers.
Evaluate your insurance policies and ensure that you’re not duplicating coverage or over-insured and that you’re covered for all the essential areas of business management, including disability, workers’ compensation, unemployment policy, and property insurance.
Also, installing sprinkler systems, security systems, fire alarms, or hiring guards can make you eligible for discounts. The lower your risks from your insurance provider’s point of view, the lower your premiums will be.
Utilize Time Management Tools And Employee Engagement Strategies
In the world of business, time is money. Wasted time means wasted dollars. And a disengaged employee can bring down business productivity levels spending you thousands of dollars a year.
A study by Gallup shows that disengaged employees cost their company the equivalent of 18% of their annual salary. Thus, you need to effectively optimize engagement and productivity in the workplace to lower your cost of doing business.
You can minimize employee distractions while limiting access to time wasters. Time management tools can help employees concentrate and focus on their tasks instead of wasting time idling. You can also use software that tracks employees’ time usage and the time spent on different projects or work activities.
Make sure to schedule business activities and encourage your employees to adhere to weekly and daily schedules. You can set expectations for reasonable amounts of time to complete specific types of tasks and activities.
To ensure that your employees are engaged and do their best for your business, you also need to create employee engagement programs. You can offer them incentives when they help your goals or exceed expectations. Make sure to give your employees a voice and always ask for their feedback and opinion. It makes them feel that they’re a part of the team and shows them you value their opinion.
Also, make sure that you invest in their career advancement by providing them with training and seminars. It can help increase employee satisfaction and not leave your business, which is another unnecessary cost on your bottom line.
Make The Most Out Of Your Business Space
Your physical business space is another area where you can save more money. Analyze your current use of your space and look for space wasters such as overflowing storage, inefficient placement of furniture or equipment, and disorganized supplies and documents.
Centralize or consolidate the different departments or rooms of your business. You can consider using space for dual purposes. For instance, a meeting room can double as a storage room or break room.
In addition, if the situation of commercial real estate in your area is expensive for you to continue your business, you can consider moving to less costly spaces or negotiating with your current landlord for a better lease price.
Or, if you don’t need to run a traditional brick-and-mortar business, why not go mobile or operate from your home. For instance, web designers can work from home since a computer and a good internet connection are their primary needs. Or in cases of service trades such as electric, tech repair, or plumbing, you can operate these services online and provide in-home sales and repair.
Modernize Your Marketing Strategies
Every business needs to market itself to reach and target customers. Thanks to the advancement of technology, advertising doesn’t have to be as expensive as before. Most marketing strategies of today can be done on your own and completely free, as long as you have the patience and effort to do so.
And while you don’t want to eliminate paid advertising that’s working, you can work on cheaper marketing alternatives.
You can start by building an online presence and creating a website. You can use social media to reach your target market. Also, you can have a customer email list where you can send out discount news and other relevant content to build rapport with your audience and keep them aware of your business.
Consider implementing a referral program. A recommendation from an existing customer is cost-effective and more likely to result in a sale than exhaustive traditional marketing.
Focus On What Matters
Business owners have a lot on their plate. You want to increase profit and expand your business by providing more products and services and continuously innovating.
However, narrowing your business focus is one of the most effective strategies to improve your profitability. While you can expand your services and products, doing so without enough capacity can only do you more harm than good. So, consider focusing more on a narrower field where you can be more productive and produce higher quality work.
After all, when you focus on quality, you’ll have more satisfied customers, increasing your sales through repeat purchases and referrals. Higher quality also means a solid reputation allowing you to charge higher prices and healthier profitability for your business.
Lower expenses and costs may not seem like a big deal daily, but they can add up and have a significant impact on your business’s cash flow. To keep your profits up, you need to control expenditures. Implementing a cost-reduction plan with the above tips should help reduce your business expenses and cost, saving you a lot of money while boosting your profit over time.
Neil Scott is a Content Marketing Manager whose greatest passion includes food, technology, and all things outdoor. He also has a background in web development and loves to be the first to find out about new trends and technologies.