No matter how far around the block customers are waiting, in business, only one line counts.
The bottom one.
That’s why reducing business expenses is critical.
Getting a grip on the costs of doing business brings you benefits both short- and long-term. “Cost controls” generally mean saving money (who doesn’t like that?) and laying the foundation for greater efficiency and profitability in the future.
But how do you start?
Well, the good news is that here at James Financial Services Inc … we eat this stuff for breakfast.
Harry James’ Insights on Reducing Business Expenses
“There are so many things hiding in plain sight that are routinely pointed out to us to no avail.” – Megan O’Grady
You have two kinds of basic costs in business: fixed and variable. A fixed cost could be the monthly payment for your long-term lease. An example of variable costs might be what you pay a supplier.
So, some great ways to start reducing business expenses is by looking at the financial blueprint of your business. All budgets in order? Does every department know what they have to spend? More to the point, do you know what they have to spend?
Next, make sure you have a good reason for reducing business expenses before you start to implement cost controls. Why are you trying to save cash? Looking to save in one area to spend (and improve, you hope) another part of your business?
Set up a spreadsheet with one axis for your departments and another for expenses. Assuming no one figure leaps out at you, you’re off and running.
Question the prime suspects
Reducing business expenses is easier in some areas of your Virginia Beach business than others — staffing, purchasing, and property, to name a few. (You’ve probably got your own list in mind.) Starting to reduce business expenses first means examining each of these areas.
Staff. Two standbys might help your Virginia Beach business here: outsourcing or turning to freelancers to reduce FTE staff, and using technology to do the job of people. Check standards of your industry, too, to avoid overpaying even in this tight labor market.
Right out of the gate these seem like tough decisions. But one big step in starting to reduce business expenses is scrutinizing all aspects of your Chesapeake Bay business, with the current bottom line and eventual profitability your highest priorities. It’s not fun. It is business ownership.
Purchasing. Are your suppliers cutting you the best possible deal? Is there another supplier just as good, but cheaper? There’s strength in numbers when buying, too. Can you partner with other Virginia Beach businesses and get yourself volume discounts?
Property. This category is a moving target right now. As businesses continue to recover and resume more normal operations, one question on everyone’s mind is whether recent work-from-home practices can continue.
You’ll have to answer this one for yourself and your business/industry, but can some of your employees continue to work from home to cut your office/workspace expenses? Don’t forget to factor in utility costs – sometimes there’s cash to be found in just turning off the lights.
These are just a few examples of areas that could be overspending. One giant red flag: Is any area of your business running over its original budget?
Who to bring in
Reducing business expenses takes a team.
Your managers and employees, for instance, are boots on the ground for your budgets. Ask them where to save money and time. You’re also more likely to get their buy-in if you’re open and honest about the process right from the start.
Your customers know more about your products and services than anyone. Ask them what you offer that they never need or use (no need for you to keep paying for that). Suppliers and vendors probably work with your industry a lot; ask their opinion, too.
Then there’s the consultant question. An objective third-person is great, but consultants aren’t cheap. And even the best of them often produce reports that go on a shelf and nobody reads.
As always when hiring most professionals, go with references from others in your industry. Remember to negotiate their fee.
Always remember that you’re not trying to control costs in a vacuum. You have to identify what else will be impacted in your Chesapeake Bay business if you decide to reduce business expenses. Will a cutback create a problem elsewhere?
As you can see, this job is more than setting up a spreadsheet. Reducing business expenses is a never-ending job, but this should get you started on the process.
If you’re wanting somebody who can take an objective look at your books and set them up RIGHT — to control for the proper things — let’s chat about it:
To your bottom line,
James Financial Services Inc