Here’s a secret most successful people know. In business, you make your profit when you buy not when you sell.
Every cost-cutting measures you implement increases your profit margin. Whether it’s the hosting plan you choose for your web presence or the deal you negotiate with your cleaning service, every penny you spend is a penny you no longer have—and pennies make dollars.
These seven small business tips for reducing wasteful spending will help you hold on to those pennies and turn them into dollars.
Yes, it’s a good idea to leverage credit for long-term big-ticket expenditures, but you also want to pay that debt down before interest penalties kick in. Whenever possible, seek deals that will forego interest payments if the debt is settled within a certain period of time. Whenever this proves impossible, negotiate the lowest interest rate you can.
Monitor Expenses Carefully
Audit your books regularly to ensure each expenditure is needed to support the current state of your business. Perhaps you purchased a subscription to a service that’s no longer relevant to your business model. There are all sorts of opportunities for recurring costs to slip into your budget in a similar fashion and remain long after they are no longer needed. Be vigilant.
One school of thought says everything is negotiable. When it comes to business transactions, nearly everything is. The nature of commerce is to maximize profit on every deal. However, there is usually room for you to get the most favorable price possible, while your vendor still makes a reasonable profit. But nobody ever says “yes” to questions you don’t ask. Hit vendors up for a deal.
Automate Repetitive Tasks
Depending upon the nature of your business, there are likely to be a number of things machines can do better than people. Once you buy a machine or program it’s paid for, while you have to keep paying people every month. Further, if a task is mind-numbingly tedious, the people performing it are prone to making mistakes—which can introduce added expense.
Leverage Virtual Tech
Meetings held online keep your key people out in the field where than continue to earn. This is far better than bringing them back to your headquarters; paying them to get there and return to where they need to be. Cloud computing solutions make collaborations between far-flung operatives feasible. Incorporating these elements into your operations can reduce the amount of square footage you need for offices, which means lower lease payments.
Hire the Best People You Can Find
Yes, this could well mean a larger payroll, but high performing people also generate more revenue. Hiring inexperienced people because you can pay them less is false economy. The errors they make, as well as their miscalculations and poor judgments will cost you more in the long run. Pay to get the best people and manage out anybody that isn’t crushing it.
Use Contract Labor Where Strategically Wise
Rather than hiring a lot of staff for temporary projects, avail yourself of freelance talent and contract employees. You’ll save on benefits right off the top. Health care expenses alone can take a sizable bite out of your revenue stream. Then, there’s vacation time, retirement funds and the like—all of which can divert your revenue stream away from profitability.
These seven small business tips for reducing wasteful spending will help you maximize your profit. Other ways of getting there include cutting expensive and ineffective marketing initiatives and monitoring your tax situation to ensure you’re taking full advantage of potential write-offs. Bottom line (pun definitely intended)—being smart with your money is just good business.