Worried about overhead and costs eating your business alive? Don't be.
If you learn to make consistently intelligent decisions with your money, you could increase profit by effectively working with what you already have.
A common saying among successful entrepreneurs is this: "Revenue is vanity, profit is sanity and cash flow is king." Cash to a business is like oxygen – without it, you're dead very quickly. Growth is dependent on a profitable environment from new customers, increasing the amount billed per client transaction, and expanding the frequency of purchases through repeat business.
However, managing the bottom line is equally important – if not more important – than increasing sales. Spending money wisely is critical to enjoying the fruits of your labour. You need to increase profit margins, which will allow more money to be made available to you, your team and your business.
There are three areas of my business where a re-evaluation of spending freed up some capital:
- Office supplies. Why pay retail prices? Look into bulk service and product providers such as Sam’s Club and Costco for everything from writing utensils and printer ink to electronic devices. Start by compiling your most recent receipts from office purchases and note what you paid for each item. Look up competitive prices online from other vendors, calculate their discounted prices and compare them to your total expenditures to see your possible savings. The more diligent you become with this process, the more you will save regularly.
- Man-hours. As a business owner, keep an eye on the productivity of your employees. Flexibility helps. For example, if you have a call centre that’s open until 8 p.m., but it rarely receives calls in the later hours, an adjustment can cut costs. Let your managers decide whether to keep specific employees on the clock, but you can oversee these decisions by implementing a system that accurately measures specific areas of productivity. Nuxiba keeps track of not only the overall numbers, but also individual statistics – a great way to start an incentive program for strong performances. By offering bonuses and micromanaging in order to accurately reward those who deserve it, you’ll boost employee satisfaction while cutting costs on man-hours. Why shouldn’t you invest more where you see the largest returns and less where you don’t?
- Travel logistics. If your business requires a lot of driving, GasBuddy is a website and mobile app that finds the closest gas stations with the lowest prices. Keep your vehicle maintained with balanced tire pressure, gas treatment formulas and even gas-saving devices. With some research, you can find safe and effective solutions to save you more dollars at the pump. Also, planning your days on the road ahead of time – whether for multiple meetings and networking opportunities or because your business requires the constant travel – will save you time and money. Run your route through Google Maps or MapQuest’s Route Planner to see a bird’s-eye view of your path to optimize it for most efficient travel. These tweaks really add up and it’s the consistent pre-planning that leads to saving time and eliminating unnecessary distance travelled.
Don't let your overhead hang over your head. Take control of these costs and make your business function like an affordable, well-oiled machine. More capital can then go toward employee compensation, new equipment and other initiatives for growth. And with an entrepreneur often getting paid at the end, these changes will definitely increase your bottom line, which often suffers greatly from unrestrained and unneeded preventable costs.
Special to The Globe and Mail
Nick Friedman is president and co-founder of College Hunks Hauling Junk and College Hunks Moving, the biggest U.S.-based junk removal and moving franchise. He started the business in college with his best friend in a beat-up cargo van, and the company now has more than 35 locations.
He is also a member of the Young Entrepreneur Council (YEC), an invite-only, non-profit organization comprised of the world's most promising young entrepreneurs. The YEC promotes entrepreneurship as a solution to unemployment and underemployment and provides entrepreneurs with access to tools, mentorship, and resources that support each stage of a company's development and growth.