Managing your margins successfully is not all about a constant push to increase your turnover. Although on the surface your profit margins will look great the more money you make, out of control overheads can whip the wind right out of your sails, so it’s just as essential that you focus on cost control and reduction of overheads to provide an anchor for when the economic seas get rough. Operating costs are a necessary evil – speculate to accumulate and all that jazz – but running a business is a marathon, not a sprint, and your ongoing training schedule should involve cutting costs without cutting corners wherever possible.
1. Check your spending
Yes, this sounds patently obvious, but ‘overheads’ is a broad term for every expense other than direct labour, direct materials and direct expenses, so everything from rent, utilities, advertising and office supplies to legal fees, insurance and travel is included under the umbrella. Have a good look at your profit and loss to highlight any more glaring, comparative year-on-year operating costs that you could cut (your marketing budget is one that often comes a cropper here), but also step back and work out some less obvious cuts that could be made and save you cash down the line.
It’s 2020, do you really need business cards in this age of multiple social media channels where we’re all followable at the swipe of a screen? Does every employee really need three fluorescent highlighters, a multipack of Post-its and four notebooks? I’ll give you that one: no, the answer is no, which is heartbreaking because stationery is life, but is also true. Suck it up and buy your own superfluous hole punch.
2. Go paperless
Believe it or not, some companies still haven’t embraced technology’s inevitable advance and moved from physical paper to storing, sharing and processing information digitally. Even more mad, the last Statista estimate approximated that every office worker still using paper uses about 10,000 pieces of it every year, which makes my head hurt, frankly.
Going paperless not only gets rid of clutter and helps the environment, but will naturally lower your costs; store any important docs in the cloud and use an electronic signature and you can wave goodbye to ink and paper costs before you list those pesky printers for sale and get some money back in the pot.
3. Review your client package pricing and process
A lot of service-based businesses take on a new client, discuss the appropriate package for them and then roll with that month after month charging a flat monthly fee according to the client’s needs. What that client thought they needed and what they actually need however, are often two very different things… As is the nature of people, for every client that’s relatively simple in their needs and therefore relatively simple to work out a fee for, there will always be the ‘could you just…’ and ‘can we just jump on another call to discuss…’ people – the clients that need a little bit more a lot of the time.
Client-professional relationships are always trial and error at the start, but it is vitally important that from the get-go you make it clear that their package will be assessed as the relationship progresses and can be amended – both in terms of reducing or increasing their fee – according to the amount of time and attention they need.
4. Consider going remote
Big question: do you really need your office? Of course the answer to this question will vary depending on your industry and the size of your company, but these days, certainly for small businesses, offices are a thing of the past. As of 2019, statistics show that the number of companies with remote workforces is on an upward surge with 16 per cent now being fully remote and a considerable 66 per cent allowing remote work to employees that request it.
Think of the money you’d save by cutting out that rental cost entirely? For lots of people, the thought of remote working sends shivers down their spine – it’s a glib vision of routines going to pot, loneliness, crap lunches and not knowing who to turn to when the milk’s run out. Worry ye not though unbelievers, thanks to the rapid development of modern tech, working environments are shifting in terms of structure and accelerating with regard to productivity faster than ever before – today’s office is a far more inclusive model with a far larger talent pool. Tempted? Check out our blog on how to create a positive remote team culture and see if that seals the deal.
5. Get an accountant
Although your brain will likely whip out a red flag shouting ‘counterintuitive’ at the very thought of shelling out more cash when you’re trying to save it, you cannot put a price on peace of mind, and accountants are the ultimate guardians of peace where money is concerned. There is a reason why everyone dreads doing their tax return and that’s because not all of us are blessed with the gift of the numerical gab and an ability to crunch numbers like a boss. Accountants are though, and not only will they take all of that deadline dread away, they are also highly skilled in finding tax deductions that it’s very likely you’ve overlooked. They are an investment worth making; we know a great one if you’d like their details 😉
6. Take action overall
Sit down and devote an entire day, week, whatever it takes to review your spending patterns, standing charges and working practices in their entirety and you’ll definitely come across ways to save cash. Start with your electricity, gas and telephone suppliers and search around for cheaper deals; consider postage – if you have to send letters and do so regularly think about investing in a franking machine and an electronic scale; check the classification of any electrical appliances before buying them for your office (a class A appliance uses less energy than a class B, and so on, right down to class F) and always buy energy-saving light bulbs; if you’ve got a landline (a landline?! Any employee born post-1990 won’t know how to use it anyway), you’re going to save money getting company mobiles; everyone uses mobiles now anyway and mobile to mobile calls are far cheaper than landline to mobile.
If you’re managing to run a business with no overheads then you’re a magical genius and you should write a book because that shit’s nigh on impossible. Seemingly necessary operating costs can at least be reduced and at best written off entirely in many cases though, which will leave you with more lovely profit in your newly lined pockets. Streamline your operating expenses and your business will have a greater chance of thriving, so make sure you’re running a tight ship.