Ten steps to improve the impact of costs on your bottom line
When times are tough, every little bit of extra cash helps. And when things are going well, a healthy bottom line can enable you to build up an emergency fund, or even expand your business. Successful small business owners are always thinking about how to increase their earnings, sustainably. Here are some strategies to consider to improve your bottom line:
1. Adjust pricing: If your sales aren't where they should be, evaluate your pricing and determine if it's fair – not only to your customers but to you. If sales are good, but earnings are not, it might be time for an increase. Consider your competition and an increase that will help your profit but not drive away your existing customers.
2. Cut expenses: Unnecessary expenses can often lead to a drop in profits. These can be anything from expensive office space to ineffective advertising, to frivolous small purchases, to inventory that's not moving, etc. Always schedule time to focus and evaluate where you're spending money and then look for places to cut back and manage these better. Perhaps have policies and procedures in place.
3. Evaluate finance: Talk to your accounts team to evaluate and speak to your bank about any existing loans or company cards to explore if they can be refinanced or consolidated. There are multiple sites that offer options so understand the terms and conditions fully.
4. New opportunities: Don't become too content in your business model. Even if it's working, you should always look for new opportunities that can help you grow and increase your earnings. It might be something directly related to your current model, or it might be something completely outside the box that you're uniquely positioned to excel in.
5. Learn to fail: Every entrepreneur knows that business can be risky, and sometimes situations don't pan out as we hope. That's why it's important to learn how to fail quickly so that your earnings don't suffer as a result, or if they do, it doesn't last so long that it's difficult to recover.
6. Work smart: Handing off non-essential duties to others can free up time you can use for strategic planning, investigating new opportunities, and other high-level tasks that make the best use of your time. Team members may appreciate the confidence you place in them, and become more invested in the company, reducing your turnover expenses.
7. Get a mentor: It doesn't hurt to have a mentor in business. Find someone who understands what owning a business is like, and learn from their mistakes and successes.
8. Target marketing: Make sure you're targeting the right demographics with your marketing messages. Do some research, think about who is most likely to benefit from your product or service and then consider how to reach out to that audience.
9. Network: You can't expect to just set up some marketing and advertising, and then sit back and watch the customers roll in. You must reach out directly as well, whether that is calls, meetings or setting up a booth at an event, take the initiative to tell people directly about your business. Don’t be afraid to ask your current customers for referrals. People are more likely to visit a business that someone else directly suggested, so referrals can be a great way to build your customer base and increase your profits.
10. Don't stop learning: No matter how good you are at your job, don't ever become too comfortable. Never stop learning and looking for ways to improve. Times change, as do technologies. Stay on the cutting edge as much as possible. Attend industry events, read industry publications, and stay up to date.
Finally, remember to be flexible and step out of your comfort zone to find a solution. As Eric McNulty and Leonard Marcus of Harvard University outline in their article for UPS: “For leaders who have risen up through an organization or in a single industry, managing a crisis can feel thrilling. The trap is you’re often returning to your operational comfort zone. Your adrenaline spikes as you make decisions and take actions. You experience a feeling of adding tangible value. However, it is like a sugar high, quickly followed by a crash. Leading through a crisis requires taking the long view, as opposed to managing the present. You need to anticipate what comes next week, next month and even next year to prepare the organization for the changes ahead. You need to delegate and trust your people as they make tough decisions, providing proper support and guidance based on your experience while resisting the temptation to take over. Knowing that a crisis can emerge at any moment, organizations in high-risk industries such as energy and aviation have robust health, safety, security and environment (HSSE) functions to manage crises.
When senior executives have deep trust in those in the HSSE function, they can focus their efforts on what’s necessary to emerge from the crisis stronger than before. When they do not, they micro-manage the response, disrupting the operating rhythm of the response managers and subverting their own desires for a positive result.”