Cut Business Costs Without Slowing Growth

When you first started out in business, you tended to scatter seeds in every field and hope they would all result in bountiful harvests. With stability as your first priority, you accepted marginally profitable sales and were not too concerned about costs.

The seed scattering finally began to yield a steady cash flow. Now, with your business maturing, you should aim for more efficient planting methods.

Planning and records

Making choices about business costs requires careful planning to ensure you don’t sacrifice long-term revenue growth for the sake of short-term profitability.

The first step towards effective planning is having a dynamic budget. Static budgets are set at the start of a year and seldom consulted. By contrast, dynamic budgets consist of spreadsheets that allow modifications throughout the year and use projected scenarios to determine the impact of spending reductions.

The key to maximizing profit with lower business costs is focusing expenditures on factors that help to achieve your planned objectives. This requires discipline and good accounting records.

Work closely with your bookkeeper to ensure that financial information is always up-to-date, and get input from your accountant, who can spot trends and suggest modifications.

You can save time and costs by simplifying communications; you and your financial team can easily share accounting records by using cloud-based platforms.

Spending to capture benefits

Controlling outlays on office incidentals has less of an impact than spending cuts in big areas such as staff, space, equipment, and promotion. For example, if you don’t serve customers or clients on your premises, move to a lower-rent area. Conversely, if you rely on walk-in customer traffic, don’t scrimp on a prime location with sufficient parking.

Do all employees need smartphones? Consider which tech devices actually help your employees acquire and retain customers. Deep-six anything that doesn’t result in benefits that are higher than costs.

Sales training is not always expensive. If online training has proved valuable in the past, repeat it with new podcasts that highlight the latest techniques in closing sales or attracting new customers.

Market research may seem costly, but having timely measurable facts actually helps keep a lid on marketing costs that don’t bring results.

For most businesses, overall marketing expenses can be reduced by spending more on Internet marketing. People use the Web to search for vendors. Presenting your business online as an authority is vital, and consistently providing updated relevant information on your website enhances your online appeal.

Inexpensive website management systems are available. These allow simplified, flexible content updating. But don’t skimp on the initial development of your website, and you leave space in your budget for professional support with social media.

Also, many successful businesses have opted for targeted email promotions rather than mass advertising to make their marketing dollars work harder.

If you have a dynamic budget, work closely with your accounting team and maximize the effectiveness of marketing and training dollars. You can cut expenses without affecting growth.

Your Accountant Can Put You on the Path to Success

Now that you and your accountant have had the tax conversation, why not use his or her expertise to help discover the valuable information contained in your financial business statements?

Your financial statements are more than a diary of where you’ve been – they’re also a map of where you’re headed. If you’re not happy with your destination, you can alter the path ahead by examining and acting on a few key elements of your financial statements, with your accountant’s help.

Revenue per customer

One sound measure is the ratio of revenue per customer. Businesses that rely on repeat sales will want to know if revenue deviations are the result of variations in sales to existing customers, or changes in the number of customers.

Revenue per employee

Examining revenue per employee will help you identify reasons for shifts in this ratio. If it’s creeping up, it could be because you’ve invested in better equipment or more efficient technology. If it’s falling, it could signal declining production because of outdated equipment.

Revenue to expenses

Compare the percentage change in revenue to fluctuations in expenses for several categories. If, for example, you’ve initiated a program of taking customers to lunch more often, a comparison of revenue to expenses will tell you whether bigger meal expenses are leading to rising sales.

The bottom line: You don’t have to operate on gut instinct. The numbers are right at your fingertips.