When it comes to running a business, there's no getting away from the fact that it’s all about the bottom line. As we enter what can only be described as ‘challenging times’ with the cost of living crisis, and soaring inflation, that bottom line has become even more important. While protecting the profitability of your business is always a must, it perhaps matters more today than at any other time in living memory.
Boosting sales is never an easy task when the economic state of the country is on shaky ground. That means that you need to explore alternative ways to protect the cash that your company holds. One such way is to investigate just what you’re spending. By decreasing your costs, you can keep your business in a much stronger position.
If you’re unsure as to how to bring your costs down, read on as we share some key strategies with you.
Having money tied up in slow-moving lines is perhaps one of the quickest routes to financial peril for any business. This inventory represents your cash and is often just found languishing in a stockroom and doing very little for your cashflow, or your business as a whole.
If you want to avoid this issue for your business then you need to explore your stock control processes. Be sure that you're only holding the stock that you need and be sure that you can easily identify the lines that are causing you issues. Once identified, have a plan to move the stock on so that you can recover at least some of your cash. This could involve selling items at a discount or bundling them together into a package.
Okay, so there are certain costs that are unavoidable when you’re running a business. An obvious example can be found when looking at suppliers. If you want products to sell then there’s no escaping the fact that you’re going to have to lay out funds first. Even if you enter into credit terms, you’re still entering into an agreement to pay that supplier no matter what. Given the risk that you’re taking, you need to be sure that you have terms that are as favourable as possible.
Take the time to build relationships with suppliers and identify the ones that are right for your business. As you form a relationship, you’re in a stronger position to start negotiating any terms. Why not try and secure a discount for being in bulk or even look at sale or return where appropriate?
Running a business has plenty in common with trying to manage a household budget, albeit on a larger scale. When you're trying to save at home, it’s natural that people stop and consider every purchase before they go ahead and commit. Do they really need that 50” TV? Does the car really need upgrading right now? Generally, the answer to questions like this tends to be ‘no’.
The same applies to your business. Do you really need that fancy new water cooler? Is there really any need to revamp the staff area and provide all singing and dancing facilities? We’re not suggesting your staff should be neglected, but can your business really justify such a spend? If not, the simple rule is ‘don’t do it’.
There are plenty of other costs in your business that are eating away at your profitability, but how often do people stop to review these? It’s easy to almost fall into a habit where an expense becomes a norm and, by the time this happens, there is little motivation to challenge it.
Challenging is something you must do though. When you’re looking at how much waste your business generates, the cost of consulting fees, and the price of legal fees, can you be sure that you're really getting the best deal for your business? If not, only you have the power to challenge it and change.
The likes of staffing costs, utility bills, and even rent for premises are things that are hard to move away from when running a business. However, these are all areas again that can be reviewed to en sure that you’re getting the very best value for money. When was the last time that you looked to change energy suppliers? When did you last explore card terminals and if there was a better deal out there? Have you ever negotiated your rent with your landlord?
If you look at the questions and are left struggling to answer then there’s a very good chance that you're missing out. Shopping around, and negotiating, on a regular basis can bring your overheads down and leave more money in your business.
It’s your business. You know what sells and what doesn’t. You also know those products and services that are making you the most money as well as the ones that are nothing but duds. If you have a product or service that is lacking in terms of profitability, why not just let it go?
By removing these from your business you're instantly giving it a boost. As well as this you’re also then freeing up the time, and the resources, to focus on those things that bring you the most profit. That makes this activity a double winner that can bring real benefits to your business.
It’s all well and good looking at strategies to decrease costs, but what if you’re not sure where your business is in the first place? If you want to improve financial performance, you need to know exactly where you are. Just some of the figures you need to know include:
• Your gross profit
• Your net profit
• Operating costs
• Cost per employee
• Revenue per employee
• Waste
• Shrink
• Trending items
When you know these figures, you can start to really understand your business. This understanding makes the task of decreasing costs so much easier.
