Key Areas Your Business Might be Wasting Money
To make enough money to keep your business active, you may need to cut costs in certain areas. How do you determine which expenses are essential and which ones you need? You probably have some idea about necessary expenses, and you might be keeping costs low, but are there ways you could save even more money? Here are a few areas of your business where expenses tend to be higher than necessary or where making some changes could be beneficial to your profits.
Product Pricing
Is your profit margin too low? That’s the number one question to ask if you are losing money on products you sell. Even if you sell items for more than you pay for them, you need to factor in other costs like employee pay, rent, utilities, taxes, and shipping. All of that needs to be made back with your profits from the products you sell, and then you need to make money on top of that, if your business is going to be successful.
This is the key area where it counts that you save money as much as possible. Buy low and sell high so that you can make a profit, and if you are unable to do that with your products and services, then you need to either change the prices or find products at a lower cost to you. Reassess product prices every year so that you can keep up with inflation costs. Factor in the rising cost of employee wages, rent, and other expenses so that you can adjust your prices accordingly.
Shipping
Let’s look specifically at shipping costs here. You may find a shipping company that is able to deliver on time and offer reasonable rates, but are they your best option? Don’t make the mistake of being loyal to a shipping service when you could try someone else and save money. Even if you only save a fraction of a dollar on each shipment, that can add up over the year with all of the shipments you receive.
Look at some options for saving on shipping even with the same supplier, like combining shipments or changing the way items are shipped to you. Depending on your location and where your products come from, you may have to use multiple shipping services- one to bring the items into the city and another to transport them to your business location. If you can cut out one of those shipping services and have your employees pick up items from nearby to bring to your business, you could save a lot of money. You might even want to do that intermittently to cut costs.
Business Cleaning
How do you clean your place of business? Do you have employees do some of the cleaning or do you hire a cheap maid agency? It will sometimes make more sense to have a professional agency do the cleaning so that your skilled employees can focus on other tasks. Then there will be times where it is more economical for the employees to do the cleaning and have the maid agency only come in periodically. All of that will depend on the size of your business, how much it costs you to pay employees versus maids, and the cleaning needs of your location. These factors determine which cleaning option is the better choice for you.
When using a maid service, make sure you are not paying for work that you can do yourself or that your business doesn’t need done. For instance, some maid services will charge you a flat rate for a bundle of services, some of which they cannot even offer at your location. Make sure you choose a maid service that is suitable for your business cleaning needs.
Advertising
Where is your business being advertised? If you only use local advertising, you might not be reaching as many customers as possible. If you advertise online only, on the other hand, you might not be reaching the local customers very well. Consider both options, but carefully plan your advertising resources. When money is low, pouring a bunch of money into advertising is not always a surefire way to boost sales. Not all advertising methods are effective. Not all of them are right for your business.
Think about who your target audience is and how you can reach them most effectively with the advertising budget you have. If you can find a really powerful way to reach customers, you can focus on that one method and cut advertising costs in other areas. To keep costs low, consider only advertising a few times a year. It may not be financially responsible to advertise all year long, and it may not be helping your sales at all.
Accounting
Are you keeping proper, detailed records for your business that include all transactions? Or have you been kind of lax there and kept only the records you think are absolutely necessary? Do you keep records from one year to the next or toss them when the year is over? There are some serious accounting mistakes that many small businesses will make, and these errors can cost you in a big way.
The benefit to keeping records from year to year is that you can compare changing costs and develop strategies based on what is working and what is not. Keeping detailed records allows you to find problems and correct them efficiently rather than relying on your memory for what you need. It can be worth the cost of hiring a professional accountant or even an accounting service to keep records for you and file your taxes. Those services can pay off in dividends as they find spending issues, help you avoid fees, and keep your records straight to eliminate problems.
These are just a few areas where your business might be losing money and where you could be saving money if you made some changes. Try looking into these key areas of your business when you are struggling financially so that you can correct course and move forward in success.