Operating a business entails many things, none of which is more important than managing your company’s finances. Any commercial endeavor is necessarily a financial one, because making a profit depends on first earning revenue and budgeting for operational costs. In order to improve your bottom line, you’ll need to find ways to reduce your overhead costs and increase your revenue, and these tips can help you get started.
Cutting Costs
The cost of doing business takes the form of various expenses known as your company’s overhead. Finding ways to cut costs is one of the fundamental ways that a business owner can get ahead, but this can be tricky when many of those costs correspond to necessities. While these expenses are essential, there are still ways to save money if you know where to look.
For example, you can buy solar panels to save on your electricity bill. Businesses don’t have the luxury of turning the lights off during the day, and the longer a business stays open each day, the worse this problem is for your monthly power bill. Solar panels offer a much more affordable model than the traditional power company. While there are up front installation costs, this buy in is fairly negligible, a much more expensive cost being a solar panel battery. Solar batteries are necessary for businesses that stay open after the sun goes down, however. Even then, the up front costs very quickly pay for themselves by saving you a substantial amount of money on your month to month electrical costs.
Another way to reduce your operating expenses is to rearrange your supply chain. The supply chain is fundamental to your business’s daily operation, but you can still shave precious dollars from each order by partnering with the right distributors. Shopping around for the best combination of low costs and reliability is an essential part of making your supply chain work for you. You can also skip the middleman and buy directly from manufacturers to cut costs even further, although this means losing out on the value added to the products you’d get from distributors and wholesalers. On that note, wholesalers offer companies a way to reduce costs by increasing their orders. Wholesalers buy and sell products in bulk, and they make a great distribution option for retailers that intend to do the same.
Increasing Income
While reducing your expenses is a great way to boost your profits, making more net revenue is just as important, if not more so. Doing so can be incredibly straightforward, as the primary method of earning more money is to improve your sales figures.
The gut reaction of many amateur businesspeople is that you can increase your revenue by increasing your prices. This is true, but it’s short sighted. Lower costs earn you sales and, more importantly, brand loyalty that results in repeat customers. Generally speaking, you want to offer competitive pricing in order to earn more money as a result of increased sales. However, your prices can be too competitive. While lower prices are enticing to consumers who want to make each dollar count, your prices need to allow you to profit off of your products. This means that you’ll need to earn enough from each product to cover the price you paid for it and then some.
The most important step you can take to increase your revenue is to bring in new customers, and the primary method you have of doing so is marketing. Marketing is fundamental to every business, because it is the way that awareness of your company spreads beyond the exposure of your location and word of mouth. The basics of marketing are fairly simple, and cost effective options like paying for ad space in the local newspaper or TV station will be sufficient for small businesses with small budgets. However, upgrading to professional marketing done by a team of experts is essential for the long term growth of your company.
Professional marketing is universally much more effective than its amateur counterpart. This is not least of all because a larger budget results in better production values in branding and advertising. While it may seem superfluous, higher quality logos and advertisements are much more effective, because the low budget alternatives are noticeably amateurish and will be more comical than compelling to the average consumer who is used to more polish. Investing in the consultation of a marketing agency is one of the most essential ways to use your profits to grow your company, because it does by expanding your reach considerably and will make you more money than it costs.
Building your company from the ground up will never be easy. The nature of commerce is that it filters out less effective business models, and that means that not everyone can make it to the top. However, these tips will set you up for success by teaching you the basics of how to reshape your finances.
