Lower your Overhead – Increase your Profits
Everyone knows you can raise your profits by raising your prices, but this is not always possible. So why not look at the other side of the coin? If you can maintain your level of service or quality of product, and lower your overhead and variable costs in the process, you can also increase your profit. That is what this short article is about presented by Good Business 101. Please like us on Facebook to see all of our blog posts!
In the competitive business world in which we live, there are almost always alternative options to your current service providers or vendors. I am a very relationship based person when it comes to my service providers and vendors, but at the end of the day I need my business to be as profitable as possible. During a slow period in your work year, why not reach out to other companies to see what they have to offer? Some items that come to mind immediately are insurance, payroll, your CPA, phone, internet, and other technology services. You may also find that your current provider has fallen behind the times. Other companies may be more innovative and also be able to save you money by making you more efficient.
I am all about paying employees well. Having to hire new employees gets very expensive, very quickly when all associated costs are considered. So, I am definitely not saying pay your employees less! I would recommend to pay them based off performance though. I think this is the most fair to everyone, and will often improve the employer’s bottom line. If you employees are only getting paid when the company is getting paid, they will be more motivated to make the company money. This can also help you to determine your profit margin more precisely before the final actual numbers are in the books.
Credit Card Rewards
I feel this may be an overlooked item by a lot of business owners. It may not improve your bottom line, but can put more money in the pocket of the owner at the end of the day if you choose to use your point for cash back. You could use the points to pay the credit card bill, which actually would improve the bottom line.
Often I personally use these points to purchase gift cards which we send to customers, and sometimes employees too, throughout the year. We would do this if a customer refers us, or maybe if I find out they tipped the crew, or something like that. I also usually have enough points to fund a vacation at the end of every season.
I don’t believe in carrying a balance on a credit card. Only purchase items on a credit card if you have the money in the bank to pay the bill in full at the end of the month. We typically spend about $200k a year operating our business. Most of which we can and do pay by credit card. Getting 1.5% back in points equals $3k back on $200k in purchases. Not too bad for money we would have spent anyways. I recommend the Chase INK card, but there are several other good cards out there.
The Bottom Line
As long as your company can provide value to your customers, you should be able to make some money. If you can lower your overhead and variable costs, get more efficient production out of your employees, and even possibly slightly raise your prices, you can make some good money. That is what Good Business 101 is all about. We want to help you improve the way you do business to create more profit while still providing tons of value to your customers. We are here and ready if you need us.
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