Running a business isn’t cheap – that’s widely known. But keeping costs low is just as critical and making sure that profits remain high. After all the total money you make from an enterprise relies on keeping your expenses down.
But what can you do to keep costs down? That’s the big question. If companies knew how to do that, we would see far fewer failures across the board.
So why are business costs so high, and what can the average firm do about it?
Renting Too Much Office Space
Companies like to have space and spread out. But renting too much office space is both unnecessary and bad for your bottom line.
If you run a solo business, you’re often better off operating your company from home. This way, you can avoid the high rental costs.
If you are a firm right in the middle of your industry’s pecking order, you might be over-stretching yourself by renting offices in the middle of town. Choosing somewhere on the outskirts could make more financial sense.
Not Taking Advantage Of Discounted Inputs
Discounted inputs are common in business, but many companies still aren’t using them. Take red diesel fuel, for instance. It attracts a lower tax than its regular non-red counterpart.
Finding discounted inputs lowers your variable costs. So if you have a large company, it is a great opportunity to make you more competitive overall.
Growing Your Fleet Too Soon
As you grow a business, you want the size of your fleet to track operational requirements one-to-one. Practically speaking, that’s not always possible: there will always be a slight mismatch between the two. However, the closer the match, the better.
Here’s a pro-tip: don’t grow your fleet unless you absolutely have to because of demand. Utilize your existing resources within 10 percent of their maximum capacity before making any further investments.
Spending Too Much On Marketing And Not Enough On Operations
Growing companies believe that the best way to build a business is to reach out to as many people as they can as quickly as possible. They want to connect with their audiences to increase their revenues.
In general, this is a good idea and something that every business should be doing. But if you focus too much on marketing, you’ll create a bias in the structure of your company. Demand will spike, but you won’t have the processes in place to deal with it.
If you do go on a massive marketing campaign, be sure that you build business systems to accommodate all your new customers first. If you don’t, you risk damage to your brand reputation.
Reducing marketing costs is relatively easy. Focus more on leveraging your audience and generating publicity via other means. You don’t have to focus on paid ads exclusively.
You Don’t Value Time
Lastly, your business costs might be high because you don’t understand the true value of time. For instance, you might be willing to go to the store to pick up a delivery to miss out on a $5 delivery fee. However, if you’d spent that same time working, you could have earned $15 or more.