Any significant drop in expenses can increase your sales and bottom line. When you run a small business or ecommerce business, you want to focus on reducing costs and making the most out of your sales.
The costs associated with running a business such as acquiring raw materials, paying salaries, marketing, and many others can eat into your ROI and profits if you don't manage them well. Here we look at some ways you can reduce your expenses and increase profits.
1. Save on telephone services
Communication is key in any business. Most small businesses spend a lot of money on telephone services when there are cheaper alternatives on the market. You can disconnect the landline if calls are costing you a lot. If you have employees, you could allow them to make calls from their mobile phones and then reimburse them at the end of the month.
You can also use VoIP to cut your business telephone costs. VoIP uses a broadband internet connection, making voice calls more personalised, flexible, and cost-effective than traditional telephone lines. Switching to VoIP saves you a lot of money on telephone calls, increasing your profits.
2. Reduce production costs
You need to think creatively if you want to cut production costs. Instead of sending leftover materials to a recycling centre, could you sell them to another business that can make use of them? Consider selling leftovers like paper, cardboard, plastic containers, and wood. You should also consider other ways to use waste materials to make other valuable products.
When it comes to productivity, less is more. Most companies use productivity as a tool to beat the competition. When making any production decision, you should ask yourself if there is a good business reason to do it.
Here are other creative ways to cut your production costs:
- Make use of all the production space in your company. If there is any left space, you can consider leasing it to a third party.
- Reduce the amount of supplies you store on the premises to avoid paying for unnecessary space.
- Centralise and consolidate the different functions in your business. For instance, a meeting room can double as a storage or break room.
Measure and keep track of production efficiency to optimise the use of resources in your business. You can start by setting performance parameters that reflect your business goals.
3. Lower financial expenses
As a business manager, you should look at the financial accounts and insurance policies and find places to save money. Here are some tips to help:
- Consolidate bank accounts and insurance policies where possible.
- Compare various insurance providers to save money. You can find an insurance provider offering a competitive rate and ask your current insurance provider to match this rate before you consider moving.
- Avoid taking on unnecessary debt. Consider the impact of debt payments on cash flow and opportunity costs. Remember, when you have a lot of business debt, it can affect your interest rates, company rating, and credit score.
- Do a cost-benefit analysis of your business before expanding.
- Before buying a new property to expand your business, take the help of conveyancing services and request a conveyancing quote .
4. Lower your marketing costs
Marketing your business plays a pivotal role in increasing your sales. As a start up, you want to build your brand by creating awareness in the market. That is why you should invest in marketing.
However, you should avoid outdated and traditional forms of marketing that won't reach your target audience. A digital content marketing strategy or email marketing may be a better option for your small business.
You can hire illustration agencies to improve your branding. You can also use free and paid advertising methods to market your business. To cut marketing costs, use inexpensive PPC and CPM marketing to save money.
Hiring a marketing agency is expensive for a small business. Digital marketing is cheaper, more effective, and will focus more on your target audience. These are some of the ways you can cut your marketing costs and save money in your business:
- Build an email list of your customers and subscribers and start a referral programme.
- Gather word-of-mouth recommendations from customers. These are more likely to convince another customer to make a purchase than traditional forms of marketing.
- Reduce traditional marketing and increase your visibility on social media.
- Increase your network on different platforms and market less. Most clients are likely to hire you when you have a recognisable brand.
5. Create a budget
A budget is an intention to invest money and other resources in your business. If you want to cut costs and increase sales in your business, you should create a monthly or annual budget.
It is impossible to manage what you cannot measure. Most business owners believe they are in control of costs and don't need a monthly budget. However, to save money, you should set a budget and stick to it. With a budget, you can save a significant amount of money.
Final thoughts
There are many ways to cut expenses and increase sales in your business. If you want to grow your business, you should focus on increasing your customer list, using the latest technology, improving production efficiency, and adopting a digital marketing strategy in your business.
Having a large sales volume doesn't always mean you're making more profits. In most cases, increased sales may signify prosperity, but expenses can eat into your bottom line if they are not managed.
Therefore, if you want positive sales results, you should track your spending and expenses. You can achieve this by optimising your ROI, increasing average tickets, adopting the latest technology in service delivery, and optimising your internal processes.
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