As entrepreneurs, it’s easy to fixate on bolstering the company’s bottom line by increasing sales. This is critical, but it’s just as important to cut unnecessary expenses. After all, you don’t want inflated operating costs to cancel out your increases in sales revenues.
Even if a business is already operating on a shoestring budget, there is virtually always room for improvement. Consider the following tips for “cutting the fat” and increasing overall profitability:
Outsource – Big businesses can benefit from outsourcing, but little guys can, too. Even small start-ups can take advantage of outsourcing a function that requires extensive capital to perform in house. A good example is the cost of website development. Hiring a topnotch in-house developer could cost you a lot of money. Outsourcing it to Elance, oDesk, or Freelancer will give you a good developer who will likely charge a lot less.
Negotiate credit card APRs – Credit cards are the lifeline of many small business owners. However, your business may be wasting money on high interest rate credit card purchases. You have may have some leverage, though. Consider negotiating with the credit card company for a lower interest rate. They may be willing to make concessions to keep you as a customer.
Negotiate prices with your suppliers – Suppliers are often willing to lower prices if the alternative is losing your business. Consider coming to them with a lower quote from another supplier. They may be able to match or beat it.
Minimize perpetual payments – There are some ongoing payments—such as utility bills—that can’t be avoided. Others, though, can and should be modified. For example, if you are making regular payments to lease equipment or vehicles, do the math to figure out if there’s a way you can buy these items and save money. It’s more cash up front, but it may be worth it down the line. Often, the purchases make you eligible for tax breaks that can offset the money spent.
Evaluate complex expenses – Scrutinize multi-tiered or multi-faceted services such as cell phone and telephone bills. Perhaps you can peel off some bells and whistles that may not be critical or combine services in ways that lower your overall bills.
Take a hatchet to your unnecessary expenses for a leaner business and enjoy the fruits of your labors with more net revenue.