Worried about overhead and costs eating your business alive? Don't be. By learning to make consistently intelligent decisions with your money, you could be increasing your profits by effectively working with what you already have.
A common saying among successful entrepreneurs is, "Revenue is vanity, profit is sanity and cash flow is king!" Cash to a business is like oxygen; without it, you’re dead very quickly. The growth of a business is dependent on a profitable environment from three main factors: increasing new clients, increasing amount billed per client transaction, and increasing frequency of purchases through repeat business.
However, managing the bottom line is equally important—if not more important—than increasing sales. Spending money wisely is critical to enjoying the fruits of your labor. This means increasing your profit margins, allowing more money to be available for you, your team and your business from what you've already made.
I've found three areas of my business where a reevaluation of spending freed up some capital:
- Office supplies. Why pay retail prices? Look into bulk service and product providers like BJ's, Sam's Club and Costco for everything from writing utensils and printer ink to electronic devices. Start by compiling your most recent receipts from office purchases and note what you paid per item. Look up competitive prices online from other vendors, calculate their discounted prices and compare them to your total expenditures to see your possible savings. The more diligent you become with this process, the more you will save regularly.
- Man-hours. As a business owner, keep an eye on the productivity of your employees. Flexibility helps. For example, if you have a call center that's open until 8 p.m. but rarely receive calls in the later hours, an adjustment can cut costs. Let your managers decide whether to keep specific employees on the clock, but you can oversee these decisions by implementing a system that accurately measures specific areas of your business' productivity. Nuxiba keeps track of not only the overall numbers, but also individual statistics—a great way to start an incentive program for strong performances. By offering bonuses and micromanaging in order to accurately reward those who deserve it, you'll boost employee satisfaction while cutting costs on man-hours. Why shouldn't you invest more where you see the largest returns and less where you don't?
- Travel logistics. If your business requires a ton of driving, GasBuddy is a website and mobile app that finds the closest gas stations with the lowest prices. Keep your vehicle maintained with balanced tire pressure, gas treatment formulas and even gas-saving devices. With some research, you can find safe and effective solutions to save you more dollars at the pump. Also, planning your days on the road ahead of time—whether for multiple meetings and networking opportunities or because your business requires the constant travel—will save you time and money. Run your route through Google Maps or MapQuest's Route Planner to see a bird's eye view of your path to optimize it for most efficient travel. These tweaks really add up and it's the consistent pre-planning that leads to saving time and eliminating unnecessary miles traveled.
Don't let your overhead hang over your head! Take control of these costs and make your business function like an affordable, well-oiled machine. More capital can then go toward toward employee compensation, new equipment and other initiatives for overall business growth. And with the entrepreneur often getting paid at the end, these changes will definitely increase your bottom line, which often suffers greatly from unrestrained and unneeded preventable costs.
Nick Friedman is President and Co-Founder of College Hunks Hauling Junk and College Hunks Moving, the largest and fastest growing US-based junk removal and moving franchise opportunities. He started the business in college with his best friend in a beat up cargo van, and now has over 35 locations nationwide.
The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. The YEC leads #FixYoungAmerica, a solutions-based movement that aims to end youth unemployment and put young Americans back to work.