Operating expenses
The higher the operating expenses of the business the lower the profits you have available to either invest back in for business growth, or to draw out of the business for personal use.
Business profitability can be improved by implementing the following:
- Review existing costs – Are all of the expenses you are incurring necessary for your business operations?
- Shop Around – Can you receive the same service at a lower price from a different supplier?
- Improve efficiencies – Can you streamline your processes to perform tasks more quickly?
- Outsource tasks – Can someone else perform a task more effectively thus enabling you to direct your time and energy to more profitable areas?
Review existing costs
It is not uncommon for there to be business expenses incurred that are no longer providing benefit to the business. Recurring subscriptions are often implemented for software, and memberships. Although they may have been useful when first incurred, they are often a set and forget arrangement and may no longer be relevant for the business operations.
One approach to review business costs is to review the bank statements for the previous 1 to 3 months and look for those payments that relate to expenses that are no longer beneficial to the business. Any outgoings that are no longer useful can be cancelled.
Some business owners choose to cancel their business credit cards. As they are contacted to update the payment details as payments fall due a decision can be made as to whether the expense is necessary.
When deciding if the expense is necessary consider asking the question – “How is this expense adding value to my business?”
Shop around
After conducting your analysis you will be left with those business expenses that are necessary for the ongoing operations of your business. You now have the opportunity to consider whether you are getting “bang for your buck” for those costs.
A comparison of business costs may lead to you finding alternate options at lower prices. For example, you may find a comparable option for your insurances, electricity, phone plans and so on. If you choose to change providers it is important that you check that the service you are receiving is sufficient for your needs.
Improve efficiencies
Increasing the productivity of your team can lead to higher outputs, lower costs or both. Creating efficiencies within the business can be achieved by:
- Creating and documenting standard operating procedures and processes. Staff can refer to these guides when performing tasks which means they are not wasting time trying to figure out how to complete a task. As an added bonus you will have less mistakes, and consistency in the delivery of service.
- Implementing software and automation for the completion of tasks. Again, this will free up time and reduce the potential for human error
- Introducing templates for repetitive tasks. Templates can be used for most administrative tasks thus creating a bank of documents that are commonly produced within your business. Take note of the documents, including emails, that you are regularly producing over the course of a month and develop a file of documents and information that can be utilised to save time, and create consistency.
- Similar tasks can be grouped and performed together to save time. Consider turning off distractions, such as emails, and other message notifications when performing time consuming tasks.
- Where you offer mobile services, consider how you can group participant appointments together to reduce the travel time. You could also make phone calls or record voice file notes whilst travelling between clients.
Outsource Tasks
Although this may sound contradictory as it involves incurring additional costs, engaging someone else to complete certain tasks may lead to higher profits as it frees up your time to focus on other areas of the business. For example, the time spent reconciling your bank accounts could be better spend on delivering supports to a participcant, or pursuing other business opportunities. It could even mean that you are taking the time to do nothing and enjoying that all important rest so that you can continue to perform at your best.