Although not normally a popular topic with employees and clients, cutting costs in a business is necessary to trim waste and eliminate excesses. Knowing how to cut costs in your business in a way that encourages growth and fosters employee cooperation is the key to business success. We’ve got a few easy ways you can do this without looking like a tight-wad in the process.
Trim Excess Spending
In the beginning, most business owners believe they are smart buying in bulk. However, unless you have hard facts to back it up, you don’t know exactly what your business’s usage needs are. Until you collect and analyze the data over the long-run, you’re still just relying on hunches; not facts. Overspending, just because it looks like a good deal, is no way to buy business supplies or merchandise for resale.
Instead of buying in bulk (especially if you’re a new business), try buying supplies on an as-needed basis. Don’t buy any supplies or inventory until you actually need the item. Make your purchases just-in-time rather than ahead-of-time. This will not only free up storage space, it will free up your cash flow so you can use it for investment or debt-relief elsewhere.
Another way to trim your excesses is to get your employees involved. Make finding excess spending and offering solutions a competitive game between them. You will be surprised at the amount of cooperation you’ll get if you offer rewards and incentives for helping to save the business money.
Identify Business Excess
It’s common for businesses to make mistakes in the beginning. It’s how we learn and it gives us the chance to make adjustments to better reach our goals. If you’ve purchased something you thought you would need, and now notice it’s gathering dust, you’re guilty of unwise spending. Don’t fret over it, what’s done, is done. However, you do need to take action.
Look around your company and identify items that your business has never used or just doesn’t use anymore. Do you have stock that you can’t move? Chances are you do and it’s just taking up valuable space in your storeroom. That space is valuable and you need to open it up. You’re sitting on an asset that is a prime candidate for liquidation which can be a quick influx of cash for your business.
Take a critical eye to everything. If you haven’t used it in quite some time, sell it. Take whatever the market will bear and be grateful you got rid of it for that much. Chances are you would have gotten even less, had you held on to it for any longer. Before you fill that space up with something else, consider the potential for it to sell in order to determine if it’s worth it.
Get Rid of Waste
This is your opportunity to “get green.” Chances are high that your business produces some type of waste. No matter how big or small your business is, you’re likely paying too much to get rid of it. Plus, you are missing an opportunity to profit by discarding rather than recycling or reselling. Being mindful and diligent in finding ways to profit from waste has made many companies a tidy fortune.
First, you need to be mindful of how much and what kinds of items you are tossing out. If you are paying for a 10 yard trash container and you are using only 2 yards for your trash; you’re paying too much. Simply cut back on the service and knock your bill down to a more reasonable expense. It’s that easy to identify where you’re wasting money, then take action to correct it in most cases. Use this strategy in other places for your business.
Furthermore, you need to be aware of the type of waste you produce. Are you tossing out things that could be recycled? There are businesses that make their money from other businesses’ wastes. From cardboard to metals, and everything in between, it all has value to somebody. Change the way you look at the waste your business produces. Then ask yourself, “What kind of money am I tossing in the dump?”
These are just a few of the ways that you can reduce the amount of money that you spend each month in your business. After reading this, chances are you’ll find other opportunities to cut costs and save more money. Take stock of your current situation and evaluate every aspect of your spending and you’ll see positive results.
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, please check out our website www.portalcfo.com. Follow us on Twitter @portalcfo
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Manny Skevofilax is a consultant and speaker that assists his clients with successfully navigating the challenges of growing their businesses profitably. Since 2003, Manny helps businesses to enhance their financial results by using his experience in strategic planning, financial statement analysis, operations, and team-building. His consulting firm, PORTAL CFO Consulting, Inc., has attracted clients from diverse industries in the United States and abroad.
Manny can be reached at 410-808-3441 or via email at firstname.lastname@example.org.