Cutting Your Costs & Expenses

While the majority of my Coaching focuses on developing new ways to build your business, it’s important to remember that the one guaranteed way of keeping more money in your bank account is by doing everything in your power to cut costs at every available opportunity.  Sounds simple, but studies have shown that a large number of businesses operating today are nowhere near maximizing their cost saving opportunities.

Why is cost cutting important?

This may seem like a fairly obvious question, however, there have been countless successful businesses that have failed because they let the costs of operating their business spiral out of control.  In fact, some of the biggest global corporate collapses have occurred due to this very reason.

So, if it can happen to billion dollar corporate giants it can happen to small businesses.  It’s one of the main reasons why 80% of all businesses fail.

Cost cutting can be a very quick way to boost your bottom line in the short term.  By shedding staff or improving the systems in your business you can immediately impact your profitability.  Constant focus on cutting costs will encourage you to review your policies and practices more often than you otherwise might consider doing.  Another key advantage is that it can improve your ability to raise capital.  If you’re approaching a bank, angel investor, venture capitalist or even your next-door neighbor, showing that you’re constantly focused on cutting costs will be seen in a very favorable light.

Being an effective cost cutter can also shelter you from a downturn in demand for your product or service. It’s very easy to live the good life when your business is making good profits. But remember, what goes up must come down.  It’s simply good business sense to reduce costs at every available opportunity.  Last, but certainly not least, is that it keeps you in control.  Isn’t that what it’s all about, being in control of your business and not the other way around?

Where to Start?

Finances

Probably the best place to start is to look at how your business is currently being financed.  If you have an overdraft, when was the last time you seriously shopped your business around to different banks? Too many Business Owners fail to recognize that the banks are now becoming more and more competitive.  This means that if you approach a number of different banks (preferably with an up to date business plan) and ask them for the best rates they can offer, you will often find that you can secure cheaper interest rates on your overdraft.  If you’re in the fortunate situation where you have surplus funds in your business bank accounts, talk to your bank manager about offsetting these funds against your mortgage or depositing them in a short-term, high-interest yielding account.

Suppliers

The same is true of your suppliers.  When was the last time you sat down with them and attempted to negotiate better payment terms or an improved volume discount? Remember, it’s the squeaky wheel that gets the grease.  You should sit down on a regular basis and analyze all of your suppliers.  Make sure you competitively quote your suppliers for everything your business needs.  You will be amazed how quickly people will negotiate with you.  Remember, it costs six times more to find a new client than it does to do business with an existing one.  Your suppliers know this and simply asking them for better terms or cheaper rates can save you a lot of money.

Trading Hours

Have you ever sat down and had a close look at your hours of operation? There are countless businesses that open too early or stay open too late just because that’s what everyone else is doing.  Have a closer look at when you are making the majority of your sales or when you receive most of your customer enquiries, (the daily journal in the Time Management section will help you to track this).  Once you have done this for a few weeks, it will become apparent that there are certain time periods that are costing you money simply to be open.  For a lot of retail stores this can be between 9 and 10 on a Monday or Tuesday morning.  Even if you reduced your work week by these two hours, that can represent a savings of over $1 or $2 thousand dollars over twelve months.  Enough for a holiday or a basic website to further promote your business.

Staff Remuneration

Is there a better way you can be rewarding your staff? A lot of Business Owners are now looking at restructuring the way they pay their staff in order to reduce costs and provide greater incentive for greater output.  It is a well known fact that salespeople have been paid increased commissions based on increased sales for many years, but there are a growing number of astute Business Owners who are now starting to pay their other non-sales people based on the level of sales an organization generates. This has the effect of having everyone focused on increasing sales so it becomes a far greater team effort across the board.  Companies that have started to do this have noticed an increase in customer satisfaction levels, faster delivery times, more efficient debt collection procedures, greater efficiency in communications, a higher level of office morale and countless other benefits.  Is there a way you could look at doing something similar in your business?

Business Premises

Where you choose to locate your business will have a major impact on your operating costs.  It is one of the most important things to consider, even if your business is well established.  When looking at locating or relocating your business it’s important to ask the following questions:

• Will customers be coming to the business or will I be going to them?

• If customers are visiting me, what impression do I want to create?

• Where do my customers come from?

• Do they need easy parking facilities?

• Do I need to be highly visible?

• Will I be employing staff?

• Is it easy for staff to find car parking or public transportation?

• How far away are your business premises from where you live?

• Does your business require partitioning? Offices? Storage space?

• Can you access your business premises after hours?

• What is your budget?

• How long is the lease for?

• What happens if I break the lease?

• Is it better to buy the business premises?

• What are the incidental costs? Cleaners? Outgoings, etc?

When you’re thinking of locating your business you need to be very clear on all of the above questions.

Eliminate The Invisible!

Once you have had a close look at some of the major expenses in your business, its then time to have a very close look at invisible expenses.  These are the incidentals you may be spending money on which your customers or staff are indifferent to.  A lot of Business Owners spend money on incidental items that don’t really add any value to the business.  Have a look at the following list of items and ask yourself if they would really be missed if they disappeared from your business tomorrow.

• Magazines and newspapers

• Expensive tea and coffee

• Couriers and express post services

• Expensive packaging

• What are some of the items in your business you could be living without?

Cost Cutting Tips And Tricks

Cash Management

Rent – Office and Storage

Pricing

Dues and Publications

Personnel

Insurance

Taxes

Office Supplies

Equipment and Phones

and about 50 more ... WITH explanations when investing in a Business Coach

Plans make difficult situations easier to handle

Chances are, if you’re looking for ways to save money in your business, there’s a specific cause. Whether it’s the state of your business or the direction you feel the economy, or your industry is going, it’s likely an overwhelming and emotional time. That’s even more reason to take a measured approach. Take a deep breath, review each area one by one, and stay creative. You’ve got this!

Oh, and I also explain all of these topics or subject matters at length ... And have written an Ebook about it, and also have this full lesson in one of my "Packages" ...