Financial problems: How to avoid them in your small business

One of my favorite financial concepts is “rationalizing” a business. By definition, from our friends at Merriam-Webster, rationalize means: to apply the principles of scientific management to (as an industry or its operations) for a desired result (as increased efficiency).  Rationalization of a business’s operations is a simple concept. However, in my opinion, it’s not easy to implement because of ego.

Entrepreneurs work very diligently to grow their businesses by adding talented staff along with non-staff overhead (nicer office, computers, the list goes on, etc.). If a rapid growth strategy is not executed with a laser-like focus on financial metrics, here is the all-too-familiar scenario that unfolds: the anticipated revenues do not materialize and the business is unable to support the increase in staff and overhead.

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How to Reduce Labor Costs in Business: 5 Cost Cutting Options You Should Explore

When thinking about how to reduce labor costs as a business owner, there are options that you can explore, without having to reduce your staff.

Like other areas of managing expenses, reducing the costs of labor associated with running your business is all about finding where fat can be trimmed, without making drastic changes that could negatively impact your company.

So, what can you do?

That’s a question we’ll explore in this post as we talk about how to reduce labor costs while keeping your operations intact as much as possible, so keep reading to learn more.

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Building a Company Pricing Strategy: How to Determine What You Should Charge

building company pricing strategy

Like any other business, you’ll eventually need a company pricing strategy. It’s an important part of the puzzle, especially for a business that’s just starting out, so you want to make absolutely certain you get it right.

A lot of different factors go into figuring out just how much you should charge for your products and services, and we’ll explore some of those things here.

So keep reading to learn more about developing a company pricing strategy that will work for your business, because many of your other business practices will depend on it

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Deductible Business Expenses: What You and Your Business Can Save On

Deductible Business Expenses

What do you know about deductible business expenses?

When you run your own company, it’s no surprise that money is one of the top priorities. This goes for what you bring in as well as what you spend.

As a new business, you want to do everything in your power to keep costs low so that they don’t eat into profits.

We’ll explore how to do just that through deductible business expenses.

So keep reading to learn about how some of your routine business practices can save you money.

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Ways to Save Your Small Business Money: The Steps You Can Take to Keep Costs Down

As a business owner, you’re probably wondering about ways to save your small business money. It takes time to build profitable revenue streams and carve your niche in your industry. Therefore, you’ll need to hold on to as much of your money as possible in order to help the business grow.

So let’s take a look at four methods to save your small business money. These methods will give you some ideas on how you can help your company move forward through smart financial planning.

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Managing Operating Costs: How You Can Stay Ahead While Keeping Costs Down

Part of being a savvy business leader involves managing operating costs to the best benefit of your business.  In many cases, this means cutting internal costs without cutting into the offerings or services that you provide to your customers.

So how can you do that?

That’s a question that many business leaders ask and therefore they need the right kind of guidance to ensure that their business is able to stay efficient and profitable.

So let’s take a look at some basic aspects of managing operating costs and you’ll see just what some of the things are that you can do to keep your expenses down as your business grows.

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How to Reduce Operating Expenses in Business

Cut costs

You can never have low enough overhead. Many entrepreneurs are always trying to figure out how to reduce operating expenses in business.

Let’s take a look at why you should reduce operating expenses in your business and what doing so can ultimately mean for a business owner like you.

1. Why Do You Want to Reduce Overhead?

With economic times being as unpredictable as they are, there are a number of reasons why you might want to keep your overhead as low as you possibly can.

Do any of these scenarios sound familiar?

  • Customer demand for your goods or services isn’t what it used to be – It could be that what you provide is seen as something of a luxury that people feel as though they can’t afford to use at the moment. Or perhaps there has been a perceived decline in your product’s quality.

Regardless of the reason, people aren’t buying in the amounts that they once did. This could lead you to trying to figure out how to reduce operating expenses in business, among other things.

  • Revenue is down across the board – This could be tied to the decreased demand or could be influenced by other factors like you being unfamiliar with what your competitors are doing.

Either way, decreased revenue could have you scrambling to figure out how to keep your head above water long enough to work out a way to get a strong cash flow going again.

  • Revenue isn’t being used efficiently – Do you often find your business is spending money in areas where it doesn’t need to be?

Wasteful spending is every bit as much a hindrance to growth in business finance as it is in personal finance, so it makes sense that you want to look at ways to keep that sort of a spending to an absolute minimum or simply eliminate it outright.

2. What You Need to Know Beforehand

What many business owners don’t realize in figuring out how to reduce operating expenses in business is that doing so can often carries risks. This makes the process of lowering your overhead more trouble than it’s worth and could potentially leave you worse off in the long run than you were when you first started.

Before you think about ways to reduce your company’s operating expenses, there are several worthwhile questions that you have to ask yourself.

Namely:

  • How will my customers be affected? – Everything that you do should ultimately benefit your customers in some way.  If the actions that you take in reducing your company’s operating costs could conceivably alienate the people to whom you provide your services, then your plans will definitely need to be reevaluated.
  • Will the quality of my products suffer? – Offering product that is inferior to what you used to provide cancels out anything that you achieved through reducing your overhead. If they don’t notice right away, your customers will notice the decline in time and take their business elsewhere.

You want to make sure that your offerings remain the same so that you can keep your customers happy.

  • Will it put me at a disadvantage? – You always want to be able to keep up with your competitors, so your strategy on how to reduce operating expenses in business should never undermine your competitive edge.

If lower overhead means fewer offerings, a reduced service area, fewer business hours or anything else that competitors could take advantage of, then you need to rework your business plan to lower your expenses without having to resort to any of those potentially harmful measures.

3. What You Can Do

Knowing what you do about how your business can be negatively affected by lowering your overhead, keep in mind that there are still several ways to go about continuing your business while remaining profitable.

The question of how to reduce operating expenses in business without being detrimental can be answered in some of the following ways:

  • Look at your employees – It makes sense that most consumers hold good customer service above anything else when considering where they will spend their money. That’s why you want to look at your employees as a way of reducing business costs.

How is that done, exactly?

Train your employees and keep them happy!

By providing a high level of training, your employees will know how to deal with certain situations and will be able to meet the needs of your customers.

Show your employees how important they are to the company’s mission and you’ll keep turnover, which can lead to high costs for your business, low.

  • Consider outsourcing some business functions – Every business relies on important services like information technology (IT) for communication purposes, and accounting for bookkeeping purposes.

In figuring out how to reduce operating expenses in business, one thing you could look at is outsourcing these important functions to professionals who specialize in these areas.

With respect to IT, outsourcing can save you money be lifting the burden of having to maintain, install, and update equipment and software, as well as having to devote time and resources to dealing with troubleshooting.

With respect to accounting, having a consultant carry out your company’s financial oversight will allow you to take advantage of expert bookkeeping that will be able to oversee financial record keeping much more efficiently than you might be able to were you to take care of it yourself.

Outsourcing both IT and accounting are textbook examples of how to reduce operating expenses in business because they allow you to get business critical services while avoiding payroll expenses and other taxes you would incur if you had these professionals as part of your regular staff.

  • Look at your production costs – How much is it costing you to provide your services to your customers?

You want to look at the materials that go into what you provide, as well as your relationship with the suppliers who provide you with those raw materials.

Are there alternatives that you can use in your production without affecting the quality? Do you have a strong enough relationship with your suppliers that you would be able to renegotiate the terms of your contract?

Many times, figuring out how to reduce operating expenses in business can be as simple as forming and maintaining strong business to business relationships with other companies.

Other times, it’s a matter of finding alternative ways to do something that you’re already doing.

  • Conserve energy – This may seem like a very basic premise, but take a look at how much good reducing your energy bill can do and you’ll see why it’s such a good idea.

By taking small steps like turning off devices when they aren’t in use, using lower wattage light bulbs, and generally conserving whenever the opportunity presents itself, you can see a dramatic reduction in one of your recurring bills.

These are just a few of the measures that you can take to keeping your company’s operating costs low. You just have to remember that when it comes to figuring out how to reduce operating expenses in business, you want to look for examples that might be unique to your industry on top of the examples illustrated here.

Keeping your overhead low without sacrificing quality of service or withdrawing the affections of long time customers will go a long way towards helping your bottom line.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

Check out our website at www.portalcfo.com for more tips on how to grow your business profitably.

You may also be interested in Learning How to Reduce Operational Risk.

How to Reduce Business Overhead: Tips for Cutting Costs Without Losing Customers

cost cutting tips for your business

How to reduce business overhead is something that many entrepreneurs like you thinks about when it comes to running a company.

And with good reason.

How to reduce business overhead is a question that’s been on the minds on entrepreneurs like you since people first started running their own businesses. It also becomes something that more and more people ask when economic times are less than ideal.

With much of the world still recovering from a time of economic turmoil, it’s an especially important question for owners of small businesses.

How High Overhead Hurts You

High overhead means that you spend more on business upkeep than you do on development and growth. Profit margins might be razor thin in the cases of many smaller businesses, meaning that every dollar has to count towards something meaningful.

But what are you supposed to do?

Besides eating into your revenue, rising overhead can cause you to raise the costs of your products and services to keep up with the increase in operating expenses. It goes without saying that if you raise your costs then your customers may jump ship and go with what your competitors offer instead.

Rising costs go hand in hand with the expansion of your business; that much is inevitable. As your company grows over time, you’ll undoubtedly have to hire more employees in order to keep up with customer demand.

Beyond that you may need to do things like order supplies in greater quantities, open additional branches, increase marketing, and move offices in when you have more employees.

But it doesn’t have to be that way.

Four Things You Can Do to Cut Costs and Stay Ahead

There are several things that you can do to minimize the costs your company takes on and enjoy the benefits of the increased revenue as a result.

  1. First, you have to know what your operating costs are – When it comes to figuring out how to reduce business overhead, it’s important that you know exactly what you’re up against.Take a look at your current costs with the most up-to-date numbers that you can acquire. This will give you an accurate assessment about what you’re spending to keep things moving behind the scenes so that the needs of your customers are met.You can also go a step further and get the same information from previous years. Chances are that comparing the current information with past information will show a trend in costs rising over time.If the changes that you see are drastic, then you know immediately where you can begin making changes as far as how to reduce business overheads are concerned.
  2. You can negotiate with other companies – It doesn’t matter what kind of business you run, you likely have to use some kind of service to process payments. Likewise, you need a company that provides you with supplies.If you have strong business to business relationships with these other entities, then it could be to your advantage to try and lower your costs by negotiating terms with them.The competitive nature of these industries means that they might be willing to work with you so that you reach a cost effective solution and they retain you as a customer.
  3. You can outsource some services to specialists – One way to cut costs is to let professionals handle certain tasks that your company needs.In finding methods on how to reduce business overhead, some companies have turned to outsourcing important functions like bookkeeping and information technology maintenance and support.Companies that provide these services excel at them. By having them do it, you can save yourself time and money so that your own company can do what it does best.
  4. Evaluate your true need for an office space – One mistake that you can easily make is buying more of an office space than you truly need to run your company.Take a look at how much space is available to you versus how many employees your company has. There’s a chance that they could occupy a smaller space without much of a change in the way that your company operates.

Beyond that, another way that you could be reducing business costs is by promoting a work environment where employees can use a virtual office setup if they’re so inclined.When you want to figure out how to reduce business overheads, consider having an arrangement where employees can work from their own homes.This provision can promote productivity by allowing your employees to work in a place where they are most comfortable, when they are most comfortable doing so.When this happens, you not only benefit from better work output but you may cut utility costs and have a reduced need for furniture and equipment at your office

Cutting Costs Should Never Come at the Expense of Alienating Your Customers

In the end, the question of how to reduce business overheads can extend much further than what’s brought up in this post. The truth of the matter is that there are countless things that entrepreneurs like you can do in order to minimize operating expenses. Whatever you decided to do, however, it’s important to remember that you always have to weight the risks of cutting costs against the rewards for doing so.

When figuring out how to reduce business overheads, you should do what you can reasonably get away with. Your cost cutting measures should never negatively impact the way you serve your customers or your ability to meet their demands. Keep costs low and customer satisfaction high, and your company’s name could easily be on everyone’s lips before you know it.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

Small Business Budgeting Strategies: Making Your Money Work for You

Small Business Budgeting for your service business
4 small business budgeting strategies

With everything that you pour into your business, the last thing you want to see happen is for it to face some kind of trouble or, even worse, failure due to financial mismanagement.When it comes to your business, you already know everything that there is to know about the product and service that you offer, right?

No matter what kind of question a business partner, customer, supplier, or lender has about what your company does and how it can improve lives, you’ll be able to answer their questions without a second thought.

Some of those same people who ask you questions about what it is that your company does may have questions about your company’s finances and expenditures too.

With the right budget and careful financial oversight applied to your business practices, you’ll not only be able to answer those questions, but you’ll be painting a clear roadmap for where you want to be and how you’ll eventually get there.

Let’s take a look at 4 Small Business Budgeting Strategies and you’ll see how crucial a component it is to your company’s overall success.

1. Look at Your Fixed Expenses

The first expenses you should take a look at as part of your small business budgeting strategies are those that occur every month without fail and stay roughly the same each billing cycle.

Think about common operating expenses like the rent for your office space, your payroll, and the taxes that you pay.

These should be among the first things that you include in your budget, because you know you’ll always have to pay costs associated with them. After including them, you can work other expenses into your budget as part of your small business budgeting strategies. They can be shaped around your fixed expenses so that there are fewer potential surprises.

Assuming that these costs remain fairly constant, you can plan for them several months at a time so that you’ll know what you pay immediately as well as what you’ll be paying for them in the long term.

2. Pick Out Costs That Can Dramatically Change From Month to Month

As part of your small business budgeting strategies, you also need to be aware of the costs that can change depending on factors like how much business you do.

Look at:

  • Your inventory
  • How many deliveries you’ll have to take on every month
  • The cost of the materials you need to provide your products or services
  • Similar things of that nature

You don’t have as much control over these as you do your fixed costs and you should plan your company’s budget around that fact accordingly. But here are some ways to reduce operating expenses in your business.

If a product or service that you offer corresponds with a particular time of the year more so than it does with others, then you’ll see an uptick in customers during that time. With that being the case, you need to consider inevitabilities like increasing employee payroll to make sure you have enough coverage, taking on extra deliveries to make sure supply meets demand, and the possibility of extending the hours of your service.

Conversely, your business could be in an industry that experiences regular “slow” periods, such as construction in the winter months. When that happens, costs associated with running your business may be dramatically lower every month.

These are just some of the considerations that you have to keep in mind, and they certainly don’t apply to every business owner, but showing some flexibility in your small business budgeting strategies will guarantee that you’ll be prepared for sudden shifts in activity that could affect your company one way or the other.

3. Examine Time Tested Patterns and Trends

Research is an essential part of business planning and things are no different when it comes to figuring out a budget.

One thing you may want to do is take a look at information like what other businesses in your area have experienced as far as traffic from customers and money coming in are concerned.

You can use past precedents to guide your actions in setting up your own small business budgeting strategies and further refine your expectations by considering where your company is located.  You can also consider the times that you operate compared to your competitors.

Using these methods, you’ll be able to estimate what you’ll see in revenue and plan subsequent actions related to your business accordingly.

4. It Pays to Stay On Top of Your Budget

Once you’ve come up with a viable strategy that can put the minds of investors and business partners at ease, you want to make sure that your company’s operations follow that roadmap closely enough that you’ll see the kind of success that was laid out in the pages of your business plan.

When you come up with good small business budgeting strategies, keep a close eye on the developments that follow the plan being put into place.

Over time, you may experience instances where the costs that you worked into your business plan may not be ideal for the situation at hand. When that proves to be the case, you can make several adjustments to better suit the circumstances:

  • Review your practices – With a small business, you can hardly afford to waste anything. If you find that money is being spent needlessly, then a review of your budget will allow you to make the adjustments necessary to guarantee that every dollar is put to work.

Conversely, you may find out that you have a surplus that could be put to use in some area of the business that needs additional attention.

Make it a habit to review your budget every few months. With the pace at which the world of business moves, you may need to make periodic changes to ensure that you’ll always come out ahead.

  • Keep business relationships strong – When running your company, the relationship that you share with other businesses can have a much larger influence on your small business budgeting strategies than you might think.

Whether we’re talking about suppliers who provide you with raw materials, or banks that extend loans to your company, you want to make sure that the terms you share with these entities are the best that they can be.

Doing so will ensure that you always have someone that you can rely on to deliver an important part of what keeps your company going.

  • Look at ways to lower costs – This can be done in a number of ways. If you want some additional breathing room then you can look at things like your office space and the equipment that you use. Read 3 tips for growing your business on a budget for more helpful info.

Can you find a space that’s just as good for a small amount of money? Is there any cheaper equipment out there that can do the job just as well as what you currently have?

Besides answering these simple questions, you shouldn’t be afraid to shop around for the suppliers who provide you with the raw materials that you need. Doing so could save enough revenue over the long term that you can redirect the money to more productive purposes.

When it comes down to it, your company needs budgeting in order to forecast its revenue streams and plan the appropriate steps to positive growth and longevity in your sector.

Regardless of what your company does, it helps to know where you’re going and how you’re going to get there. With these small business budgeting strategies, you can shape the kind of business plan that has helped countless companies like yours see success and become leaders in their fields.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

For more information on business analysis, business planning, and ways to grow your small business profitably, check out our website at www.portalcfo.com.

How to Reduce Operating Costs: Cost Saving Strategies for All Businesses

In order to be a successful entrepreneur, you not only need to be able to keep your costs low, but you need to make sure that the quality of your products and services never suffers. This is paramount to making sure that your customers, the most important people in the equation, are kept happy.

Whether you want to reduce operating costs out of desire or necessity, the options that you have available to you are varied enough that you should be able to find a solution that fits your company.

With that in mind, let’s look at how to reduce operating costs and what other entrepreneurs, as well as business experts, have done in the past.

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