Your Guide to Cutting Costs and Increasing Revenue When Running a Small Business
Every business has expenses no matter their size. Even if it has only one employee, the cost of that business can be significant enough to impact the revenue.
All these potential costs come up from the insurance and business expenses, so they’re legitimate. This is why cutting costs and learning how to control them is important. In order to handle all the mandatory expenses one business can have, you have to know what other costs you can reduce.
Sales are usually considered as the only viable way to increase the revenue, which is not quite true. For the company to efficiently operate, it has to efficiently handle its costs. Every business must use a system that will make sure this efficiency is respected if it wants to be successful.
The following guide will help you cut the costs and increase revenue when running a small business.
1. Deal with your debts
Before you start cutting costs, examine your debts. Every business has them and it’s only the matter of how much of revenue goes into settling them. One thing you can do is being more active regarding the manner that debt is paid off.
If you notice that a big portion of your revenue goes towards the debt, then you should find ways to decrease those payments. Consult your banker or financial adviser on all possible methods to minimize the stress to your profit and renegotiate the installments. If possible, consider paying off the debt as much as you can so the consequent payments would present less of a burden for your company.
2. Sell what you have
If you are the type of company that has inventory, then it’s time to examine its state. There might be items there which are collecting dust while they could be making you money. If you failed to sell certain products before, consider selling them now and making room for new things.
Discounts and sales are one of the ways companies try to lose the piled up inventory items. Observe it this way: you invested in their production and never got the return of that investment. Concentrating on selling them will bring additional profit you can use to pay off the debts or invest in new products.
3. Learn to negotiate
Negotiating is an important part of any successful business. In order to have products or services to offer, you will have to deal with suppliers, distributors, and vendors. These providers, as well as you, will have interest in negotiating a right price.
In order to be in a position to negotiate, you have to build a relationship with the certain provider. After successfully conducting business a few times, you can renegotiate your position. If they don’t agree, simply switch the provider which can also be a useful technique to make them reconsider.
Also, if you lease the property for your business, negotiate the price. You certainly plan to lease it for a longer period of time and that is something you can use as leverage to lower the price. The same applies to equipment used in production. In both cases, evaluate your position and examine whether it’s better to buy or lease.
4. Buy in bulk
Instead of month-to-month services, opt for buying in bulk. Usually, you can save a significant amount of money by buying something and paying annually. For example, if you have software subscriptions, you can purchase the service on annual level.
This also applies to magazine or database subscriptions, as well as purchases of products necessary for manufacturing. Additionally, if you use certain services like air conditioning maintenance, cleaning agency or equipment servicing, you can also sign an agreement for a longer period and lower the price.
5. Decide on automation for cutting costs
One of the ways for cutting costs and increasing efficiency is to use automation in certain aspects of your business. For example, instead of manually processing credit cards, use an automated system. Although many small businesses avoid this due to fees for a merchant account, it’s efficient and uses less processing time.
Examine all the levels of your business and see what you can automate. Things like sending certain information to your customer can be conducted via newsletters and e-mails. Besides saving you time, it will also save you money since you won’t need a person or more to perform all these duties.
6. Cover your legal aspects
As a business, you will have to deal with a lot of legal aspects and respect certain regulation. The best way to make sure everything is in order is to hire professionals to do this for you. This may seem like an expensive thing to do, but actually, you can lose a lot of money in legal battles.
For example, if you have a unique product it would be wise to contact a patent attorney and protect your rights contact a patent attorney and protect your rights. If not, someone else may copy your idea and patent it as their own. What would come next is a long and money-draining action to prove your invention. Moreover, that can cost more than attorney’s fee and patent registration, to begin with.
7. Value talent
Valuing talent is another proactive way of cuttings costs. You shouldn’t save money on talented individuals since they could bring you more profit. If you can’t pay an appropriate price for the talent then it’s better to not hire them at all.
Underpaid staff will feel unmotivated to give you their maximum and that can only lead to further expenses. Paying the right price for talent is a good investment for any business since these people will lead you to growth.
8. Cut vehicle expenses
If you need vehicles to conduct your business, then you have to keep in mind the costs they carry. Vehicles need regular maintenance and cost money on daily basis. However, the first thing you should do is choose the most economical vehicle you can in order to lower the gas costs.
Another important factor is the non-owned vehicle insurance. It will cover possible damages due to accidents and theft. In the end, limit the use of the vehicle for business purposes only. Make careful plan every day in order to use the most economical route when delivering products or services.
9. Cutting costs for advertising
Advertising is very important for the business but you can still save on some of its aspects. Since most of the potential customers are online, use that to your advantage. Build a proficient website and social media profile which will strengthen your online presence.
Communicate with your customers regularly and respectfully, even if they have complained. This will build your reputation and trust. Carrying business cards and sending a newsletter on a weekly basis is also an inexpensive way to reach your potential customers.
10. Downsize the number of employees
One of the most unpopular ways is to save money by downsizing the number of employees. This measure is not comfortable for employers and is usually a last resort. If this is something you have to do, be respectful and make sure that you give your employees enough time to find another job.
When deciding to fire a certain number of employees, the company is well aware it will affect its reputation and image. However, in business, you have to think practically and in a way that will maintain your position in the market. Without this type of analytical thinking and willingness to take unpopular measures, the whole company may fail.
Every individual must have a meaningful and justified position in the company in order to maintain the quality of operation, service, and production. That is not something you can achieve do unless you direct money in the appropriate direction.
There are more things you can do than what we stated here for cutting costs. It all depends on the type of your business and what is your goal. Choose wisely the best options for your business and develop your plans accordingly. In the end, the end goal is to increase revenue and you can’t do that by relying only on selling of your products and services.