Successful business owners know that profit is not what a company “makes”, but what it “keeps”. You may have excellent sales but still lose money if your expenses are out of control.
When did you last evaluate your business expenses? Every business owner should regularly review expenses. You have to know where your money is going and be sure that each expense is legitimate and necessary. If your business is struggling for profits, examine these cost-cutting ideas and see if you can implement one or more into your business action plans. There are many ways to cut expenses, and often, a review of your books will show you areas where you might spend less. Here are some common areas that cost-cutting measures will help:
Utility use:You can often save money by watching utility use. Implement a power-saving policy—cut off lights in unused rooms, check your insulation and weather stripping, and monitor your thermostat and water heater settings. Switch to compact fluorescent bulbs and unplug appliances not being used. Some utility companies offer a free service where they will check your building (even your house) for energy leaks.
Telephone and internet service: Check your current plans. Are you paying for too much service or paying overage charges for too little service? Check with your providers for package deals and specials. If it has been awhile since you chose your plan, it could be less expensive now even with the same company. And, many companies offer “sign-up” bonuses that could result in quite a big savings.
Technology costs: Check your lease agreements and maintenance contracts. You may find ways to save money by changing your service plans or you may determine that you do not need a particular service at all. Also, if you have high repair bills for older equipment, look into newer models. Technology changes so quickly that sometimes prices drop dramatically and new equipment is cheaper than repairing old, outdated equipment.
Office supplies: Finding less expensive substitutes or buying in bulk often helps quite a bit. There are vast price differences in business “staples” such as business cards, copy paper, ink pens and the like. Comparison shopping is quite easy to do online. Check to make sure you are not overpaying. And, local warehouse clubs may have cheaper pricing and you’ll save shipping costs if you go pick up supplies yourself.
Advertising: Track your advertising to make sure it is working and cut out anything that is not bringing you business. Ask your customers how they heard about you and if a particular ad is never mentioned, stop it and put that money into something that works. This includes big ticket ads like the yellow pages, too!
Extras:You may be paying for extras like coffee service or bottled water service. Shopping for coffee, water, sodas and snacks at a warehouse club might be a big cost savings. Or, you could talk to your distributor about ways to cut costs by switching brands or changing quantities.
Labor: If you have employees, labor is probably one of your biggest expenses. Evaluate your staffing levels, and try to eliminate overtime. And, learn good management skills! Well-managed employees are a priceless asset and can help your business tremendously, but poorly-managed employees can actually cost you much more than what you pay them.
Cost Creep: This is when you pay for the same things over and over and the price goes up just a bit here and a bit there so that you barely notice it. One company increases their shipping costs by 3%, another adds a $2 service fee and the next thing you know, your costs are eating up your profits.
Cost control is a very important part of any business owner’s job. Even little things like paying $1 more per ream of paper can add up to significant unnecessary costs over the course of a year. Cutting expenses can make your business more profitable.
Action Item: Schedule a regular time each month to review expenses and investigate ways to save money. Keep track of the savings you find each month—it’s fun to add them all up and see how much “profit” you found by being diligent about costs.
If you need to learn the basics of how to control costs, The Cost Management Toolbox comes highly recommended as being easy to understand and implement.