Is your small business haemorrhaging money? If you are struggling to stay within budget, it is most definitely time to look at how and where you are spending money and what you can do to cut back and save money and maximise your profit margin.
Know your Margins
If you don’t know your margins, then you don’t know how and where you can save money. Compare these against your competitors to see how you can increase costs or save on costs. But you need this benchmark before you even look at overhauling your profit margin.
Bad Debt Reserve
Are you allowing for the provision of bad debts? No one likes to think those they do business with will fail to pay on time or at all, but it happens and making accommodations for this will help you to maximise your profit margin. Check your industry standard to see why your bad debt reserve should be and this way, you have money to fall back in the case of bad debts. This money can prop up your profits or help you to chase the debtor using methods such as debt recovery firms or Skip Tracing.
Looking at how you can streamline your supply chain should be one of your first options when it comes to maximising profits margin. Negotiate with your suppliers to get the best deal possible. Consider bigger bulk purchases to reduce costs or opt for subscriptions and get the best prices possible on repeat custom.
Instead of charging one upfront cost, if your cash flow is struggling, try to offer discounts. Say you offer a service for $150 one-off cost. Consider offering a deal for ongoing work, for example, contract your customers into a year’s deal at the discounted price of $100 per month. While this isn’t making as much as the one-off cost, you can benefit from upfront payment and potentially improve relations with your customers, leading to more work in the furniture for other products or services.
Where exactly are you spending your money? Once you have negotiated better deals with your suppliers, look at other ways you can reduce outgoings. Cut down on paper usage by going digital. Reduce energy consumption but switching to automatic lighting that turns off when people leave a room. Identify areas of waste and look to reduce this. Cut down on travel by conducting meetings virtually if possible. If not opt for cheaper methods of travel such as catching the red-eye over peak time travel.
Take advantage of customer sales by maximising your sale with add on products or services they need. Try to upsell effectively without forcing additional sales on them by appealing to gaps in their purchase. If you don’t have products to upsell, check out where your competitors are expanding their businesses and look for gaps in the market to diversify your company and meet demand. By offering a more rounded complete service, you will front from repeated custom time and time again.