How Small Business Owners can Identify Unnecessary Costs
Cost management is an essential part of running a small business, and having money on hand with which to make strategic decisions and act on opportunities as they present themselves is another important consideration for business owners, since without any liquid capital they may find themselves flush with assets but lacking an ability to quickly act. Reducing costs without reducing customer service can be tricky, but it is manageable provided adequate thought goes in to tapering off spending.
What is the value contributed by programs that you are considering tapering off? This question may seem like it is simple to answer, but in reality, you may want to ask your employees how they are effected by the use of certain programs before you cut them off. The reason why is that they may have come to rely on a certain service that is showing up in your accounting numbers that you are not personally involved with. If you don’t know what something is that you are paying for, verify first that it is non-essential with your employees to avoid throwing things in your office into confusion. On the other side of the coin, your employees may have ideas pertaining to things that you are already paying for that they think could be parted with relatively painlessly. Additionally, knowing what marketing is performing and which lead sources are producing poor quality or not enough leads is another area that requires careful consideration.
Identify excess and where you are able to pare down options to increase efficiency. One problem that business owners often create for themselves is wanting to offer a huge range of options in order to grab the most amount of business possible. The issue is that in a smaller sized business, supporting the inventory or infrastructure required to offer a very broad range of options for consumers can be more trouble than it is worth. Instead, identify top sellers and specialize. This allows your business to focus on quick turnaround and quality, which is essential in building word of mouth. It also will help you avoid the trap of purchasing large amounts of inventory that can go stagnant should orders slow down.
Ensure that you are paying for value from consultants and contractors. People who you have hired to help optimize your business will usually not come cheap. It is your responsibility to make sure that they are producing value for your company, as opposed to simply draining away the resources that you could be allocating to other areas or holding on to as cash on hand. They should be able to provide details as to what it is they are doing, the amount of time that they spend working for your business and their plans going forwards. Remote management can be tougher, but shying away from addressing external costs is not a smart plan in the end, since knowing where the money is going in a business is the difference between success and failure.
Photo Credit to 401(K) 2012 on Flickr