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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Financial Terms for Small Business: Important Terms You Need to Know

What do you know about financial terms for small business?

No matter what industry you are in, being at the forefront of your own business means knowing a little about everything that makes your company tick.

And that knowledge is especially important when it comes to your finances.

Regardless of whether your company is just getting started up or has been running for years, knowing and having control of every aspect of business finance is key to your growth.

So just what are some of the important terms that you need to know about and how do they affect your company’s development?

Keep reading this post to find out.

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Raising Business Capital: How You Can Infuse Money into Your Venture

Raising business capital is one of the most important things that you will have to do in your capacity as the owner of your business, so it makes sense that you want to do everything possible to raise as much as you can.

But what, exactly, can you do?

Like so many other areas of business development, there’s no “one size fits all” solution to infusing money into your business. A lot of factors have to be considered and many variables have to be taken into account in order for a business owner like you to determine the best way to approaching the problem.

With that in mind, let’s take some of the things that you can do when raising business capital and you may find a solution that best fits your needs and those of your growing company.

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Reducing Operating Costs: How You Can Keep Your Profit Margins Wide

As a business owner, reducing operating costs is one of your many, many obligations.

It’s also one of your most important considerations.

While this is something that applies to every stage in business, it’s especially important during the formative years when operating budgets are tight and every cent counts.

It may seem like it goes without saying, but it can’t be stressed enough that your earnings need to outpace your expenditures if you want to keep your doors open. So, you want to look at every area of your company and make sure that money is being used as wisely as possible.

By doing that, you can make sure that you’re able to stay on task and can continue to guide your company towards growth and prosperity.

So let’s look at some of the ways you can go about reducing your operating costs so that your short-term business goals are more easily obtained.

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Business Reorganization Consulting

Going through the process of restructuring your business can be difficult enough that you should consider business reorganization consulting in order to make sure the process goes smoothly for everyone involved.

With the economy being the way it is right now, many businesses of all sizes and industries are changing the way that they operate.

Some are scaling back on operations by reducing staff or changing locations to cut costs.

Others are repurposing their staff and consolidating roles

During economic times like this, it isn’t uncommon to see mergers and acquisitions occur so that a company on the brink of failure can keep its doors open. Nor is it uncommon to see a company completely rebrand itself and radically change its offerings in order to weather an economic downturn.

Regardless of the reason why your company is changing the way it does things, having business reorganization consulting can make sure that you’re able to turn your company around and get through the restructuring process without missing a step that could come back to haunt you later.

So what are some of the areas that you need to cover when you’re restructuring?

Let’s take a look.

Key Areas and Characteristics

No one walks away unaffected when it comes to reorganizing a company. From the executives at the very top to the newest entry-level hires, everyone is going to feel the impact of this major event one way or another.

As a result, this fact extends to all areas of your company as well. Departments and practices like management, marketing, and accounting are all going to change in some way. Beyond those, you need to consider areas like:

  • Your Assets – How will these be affected when you reorganize?

Depending on the nature of the restructuring, some might remain intact, but others might have to be sold in order to generate revenue during the restructuring process. If some of your assets are underutilized, it might be in your best interest to dump them and keep them from becoming liabilities.

  • Basic Operations – Restructuring means taking a look at every part of your business, including the everyday practices that turn the wheels of the company.

In some instances, you’ll have to ask yourself if certain aspects of your operation can be outsourced for more efficient, more cost-effective output than what your company currently produces.

  • Your Reputation – Business reorganization consulting would, in part, advise you on how to maintain your relationship with your customers through effective public relations that assures them your restructuring will do nothing but benefit them.

As you know, customers vote with their dollars, so you want to do everything that you can to make sure that you don’t lose your base as your company changes its operations.

  • Your Plan – Without a strong business plan, you’re not going to get anywhere. That’s why it’s important to know exactly where you’re going as you work through your restructuring. You can use it to assess the current state of your business and establish goals that you want to reach, as well as a timeline for when you want to reach them.
  • Your Debt – Business reorganization consulting will help you make sense of your debt and how it relates to your plans to restructure.

It’s important that you have a strong understanding of your debt obligations at all times, and that means, among other things, carefully monitoring payments that you make on it.  It’s possible that, in analyzing this part of your business, you will have to rely on some negotiations with your creditors.

It’s important to make sure that all of your affairs are in order when you’re reorganizing your company’s operations and the areas discussed on this page are just a few that you’ll need to be familiar with during the process.

With business reorganization consulting, you can make sure that each area of your business gets the attention it needs during restructuring, so that you’ll be able to adopt new business practices without any trouble.

With all of the work it takes to rearrange the way your business operates, the last thing you want is to make a mistake that could potentially jeopardize the process. Good business reorganization consulting can make sure that happens.

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

For more ideas on how to grow your business, please check out our website.

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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!