If you want to make money, you have to spend money. No business comes without its expenses, and just like every other element of running a business, your expenses need to be smarter — not harder.
Whether you’re a growing chain or a mom & pop IT desk, These 5 tips should help any business realize lower costs and wider margins.
1. Supply and Demand
It might not seem obvious at first, but as a business owner in need of supply, you are a sales target. Even a massive corporation is someone’s customer, and business-facing suppliers are just as eager to retain clients as they are to acquire new ones. If your business relies on regular material supplies, you should reexamine the potential for discounts from current suppliers. Bulk suppliers will sometimes be willing to reduce the price of regularly scheduled orders, especially if you’ve already established yourself as a consistent and reliable client. Suppliers will naturally prioritize high volume clients whose money would be sorely missed.
If your leverage as a client isn’t quite discount calibre, don’t give up: consider looking elsewhere. Even if switching suppliers sounds like a headache, a better offer from someone else and the threat of leaving may be what it takes for your current supplier to do what they can to retain your business. Don’t be surprised when your supplier changes their tune once they realize you’re willing to explore your options. If they don’t? Well, you have a better deal waiting for you.
2. Buying Time
Imagine you run a catering service. You need to account for your product reaching your client on schedule. Some customers will be willing and able to pick up their food onsite, but it’s advantageous to both parties if the food can come to them instead, so you deliver the food yourself. It may seem like you’re cutting costs this way — after all, you’re saving on delivery staff wages — but this kind of thinking is less pragmatic than it is thrifty. By hiring delivery staff, you save money on fuel, reduce wear on your vehicle, and free up time to work in the kitchen, allowing you to take on a greater number of contracts.
Think twice about how much your time is worth. It may sound like common sense, but it’s important to assess the value of your time on a case-by-case basis. There are occasions when doing a job yourself will save on costs, but don’t become addicted to this philosophy. At the end of the day, knowing when to spend money may be the difference between wasted time and time well spent.
3. Advertising Cost
Most social media networks like Facebook, Twitter, and Instagram offer advertising solutions for any budget and powerful demographic targeting. If you familiarize yourself with these tools and do just a little research, you can make a miniscule budget work the way you want, when you want. There’s no reason to assume broad reach means successful customer connections. Precision is your ally.
If web ads aren’t giving you a satisfactory return on your investment, consider the branded ballpoint pen: it’s ever present, it constantly trades hands, and it exists in real life. The modern consumer is more aware of ads than ever, but still responds to usable, tangible items. While purchasing physical product for the sole purpose of spreading brand awareness may seem like a big investment, it doesn’t have to be, with companies like GoPromo offering products and quantities to match most budgets.
What if you’re hesitant to spend any money on advertising, but you can afford to spend some time? In that case, a mailing list may be what you’re after. While access to targeted mailing lists may accrue new costs, a mailing list composed of prior customers’ addresses won’t. Brick-and-mortar businesses should get in the habit of asking for customer contact information at the time of transaction. If you run a POS system, inquire about any contact gathering functionality that could be enabled if you have long-term interest in direct advertising via email and retaining regular clients.
4. Tax Breaks
No matter how excellent your performance and how satisfying your margins, come tax season, you might find a surprising portion of revenue pocketed by the tax man. This doesn’t have to be the case. More often than not, you will be able to take advantage of tax credits that reflect your various business expenses throughout the year. Whether dealing with the IRS in the United States or the CRA in Canada, you should always do what you can to mitigate your tax burden.
The simplest and most effective advice: save your receipts. It may sound like common sense, but many new businesses underestimate the value of the smallest expenses, not realizing how quickly these add up. Every receipt should be saved and, ideally, filed into categories matching the business tax credits offered by your country’s revenue service, to make inputting expense information an easier, faster process when the time comes.
Is your company a larger one, or do you expect to experience large scale growth in the near future? If you’re in the US, consider incorporating in a business friendly state like Delaware. There’s a reason over half of Fortune 500 companies are incorporated in the state despite few maintaining any physical presence there: not only is it generally light on business taxes, but its government and legal system are streamlined for resolving business-related disputes and issues of liability.
5. Why Rent an Office?
Now that COVID-19 has made us weary of congregating indoors and pushed so many out of the office and into the home, there’s a reckoning in the professional world: why rent office space if your work can be done remotely? Many employees have found they are more comfortable working at home, in cafes, or while travelling, with few expressing a longing for frustrating, time consuming commutes and office dress codes. If you run a business that does not rely on face-to-face customer interaction and your employees primarily work using computers, shedding the office space or downsizing to a smaller suite should be on your menu.
