One of the simplest ways to grow your bottom line is to tighten your belt and spend less.
As the business owner, you get to choose what you spend, with who, how often, and how much. However, as simple as this seems, reducing overhead expenses can be a double-edged sword.
Your fixed costs (or overheads) are largely incurred no matter what level of sales or activity you have; things like rent, power, telecommunications, interest, insurance, and so on. Issues can arise where you cut costs which form an essential part of your level of service.
For example, let’s say you reduce your rent cost by choosing a cheaper location but in doing so, make your business less visible to your customers, resulting in reduced sales. Another scenario could be reducing your advertising or marketing spending and as a result getting fewer leads or enquiries.
It’s important to determine what your return on investment is from the costs you are incurring. Do you really need to spend as much on advertising, or could you achieve more growth simply through networking and referrals? Do you even know what return you are getting from that advertising spend?
Likewise, is there any element of wastage in your costs? Could you change providers to achieve the same level of service for a lower cost (e.g. by changing power or telecommunications providers)?
And while you’re thinking about overheads, do you consider the price of your accounting services to be a cost or an investment? If you consider your accounting fees to be a cost, then these costs could be reviewed and maybe cut. However, if you consider your spend with your accountant as a strategic investment to help you to run a better business, then you need them now more than ever.
Talk to us about how to trim the fat in your costs without compromising your ability to grow your business.
“The biggest expense is opportunity cost.” – Anon