Understanding your business expenses and how they can cut into your profits is necessary for a business of any size. Some expenses you have may even be unnecessary. Here is a list of eight common sources of these expenses that can affect your company’s profitability.
- Products/Services – We all know there is a cost to making products or providing services, but do you know exactly how much it costs to make each product or to provide a service? Do you know your industry-standard profit margin? Are you hitting that profit margin? If you can’t answer these questions, then you may not know which products or services are the most profitable, which you want to focus on in your marketing, or even which you may want to consider cutting! Know which products and services are vital to your company, and know which may be cutting into your profits and get rid of those.
- Recurring business expenses – You know the line “everything can be negotiated”, and this includes everything from your rent to your vendor contracts. One vendor may have told you what their bottom line is, but what if you told that vendor you were looking at other options? And you should be, because if that vendor isn’t willing to negotiate, you may want to change vendors and you will find one that is better for your bottom line. Take a look at all of your recurring expenses with an eye toward negotiating the best price possible for each one.
- Taxes – death and taxes, right? Yes, they are for certain, but that doesn’t mean you should be paying a penny more in taxes than you really have to. This is actually a situation in which spending a little can save you a lot. Hiring a skilled accounting firm could help you tremendously, and not just on taxes, but all of your expenses, helping you increase your profits. A good accounting firm can make sure you’re not wasting any of your hard-earned profits by paying more in taxes than you need to.
- Insurance – do you let your insurance automatically renew each year? If so, you may be missing out on savings you could take advantage of, as insurance rates and coverage change every year. You may find a better plan from another carrier, or you could restructure your plan with your current carrier. Here’s one example: “a business owner’s policy” bundles commercial property insurance with general liability coverage at a discounted rate. Reviewing your insurance coverage annually is a good way to lower your business expenses.
- Supplies – There are many types of business supplies, from staples to paper to raw materials to equipment parts. Suppliers can be one of your best options for cutting business expenses, so take a look at every type of supply you need to purchase and where you are buying them from. First, cut anything you really don’t need, and then check out another supplier to see if you could save money from them. Many are willing to negotiate – they will give you a better offer if they know you are looking around.
- Office space – after COVID happened, office space is suddenly the most optimal of all business expenses. Since many companies have had to allow a remote workforce in order to keep the doors open, they’ve realized what a huge savings this remote workforce is. Less expense on rent, utilities, etc. Encouraging a mostly remote workforce can give you serious financial gain.
- Computing – back in the day, you would spend loads on computer and infrastructure equipment (along with regular software upgrades), but these days we have the cloud to help keep businesses store their data without all of the expense or the office space. This also gives you the option of increasing your storage capacity or bandwidth on an as-needed basis, transforming IT into one of your most flexible business expenses.
- Marketing – every business needs marketing unless you don’t want to grow your business. Marketing is essential for generating leads and creating brand awareness, but hiring a marketing team in-house can get pricey. This is why it’s beneficial to hire a great digital marketing firm to do all of that for you for much less of the cost. They are experts, and you’ll feel a weight off your shoulders knowing that the experts are undertaking all of your marketing needs.
There are many ways to save money and increase profits, which is our specialty at Profit Solutions. Go here to get a free 30-minute consultation!