Running a profitable business requires that you keep your cost of doing business is as low as possible. In order to keep your costs low, it requires that you audit your costs and expenses more often than you do. Now is the time to do it again.
Auditing your costs is one of the quickest impacts on your bottom line and is often overlooked when growing your business. Cutting your cost of goods sold increases your gross profit margins. Managing your expenses increases your net profit margin and the amount you get to bring home.
Where do you begin?
Your Bank Statements
You may not realize what you are really spending each month. We all run a lot of our lifestyle through our business accounts but what is it doing to our bottom line? Review the last 3 months of your bank statements. Look for items that do not support growing your profit. Once you recognize the non-essential charges, get rid of them.
Review Your COGS
Your cost of goods sold can totally affect your margins for profit. Now is the time to review your suppliers, your production, and your team for reductions in cost. Check for other suppliers, because there will always be more than one that offers your components. Your production may be able to produce it faster with less waste. Even if you are a service company, production and supporting supplies can be improved. As always, look at your team for ways to either reduce their number or increase their productivity. There are always ways to improve your COGS.
Your operating expenses occur whether you sell an item or not. These expenses need to be audited as well. Rent, utilities, labor, software, providers, and more can be renegotiated, brought in-house, or taken off-shore to reduce expenses. In the same view, if they are not essential to operating, consider removing them.
Cutting your costs is the fastest and most impactful strategy you can implement into your business. Not all costs can be cut at each review, but knowing that you can do better at the next contract renewal gives you the upper hand in negotiations. Don’t be afraid to negotiate, you’d be surprised at the benefits. Even long-term relationships can and should be negotiated. The better you manage your costs, the more profitable you will be.
Marcia Riner is a business growth strategist and the CEO of Trajectory Consulting. She helps small business owners to increase profits, drive growth, and to be in a great position to sell it someday. Together, she helps you create your roadmap to improve, scale, and maximize the value of your company. Check out her website @ www.TrajectoryBiz.com
In her book The Profit Accelerator, she provides 12 Ways To Dramatically Increase
Your Revenue, Profit, And Value. Download her book for FREE at https://trajectoryprofits.com/book-download/