It’s a common belief amongst new business owners that aiming for top-line growth – increasing sales, investing in marketing, etc. – is the way to turn a profit. However, while additional sales are always nice, it’s actually the wrong way to look at things.
Instead, business owners should look towards their bottom lines. The bottom line of your business finances is your net earnings, and all your profits go towards it. However, it also includes your costs, which will be subtracted from your gross profits to give you a net result.
It makes sense, then, that businesses who focus on improving their bottom line – by cutting costs, for example – will return higher levels of profit without making any more sales at all. And when they do make more sales, the cost of doing so will be significantly reduced, resulting in a better all round performance.
With all this in mind, let’s take a look at some of the ways that savvy business owners approach improving their bottom lines. Try them out in your business, and you should reap the rewards.
Outsource, don’t hire
Hiring people on full-time contracts is one of the most expensive things you can do as a business. So don’t do it unless it makes financial sense, which is often a lot later on in the day than you might think. There will be a point in time when hiring employees makes sense, of course, but until then you should consider outsourcing and using contractors instead. Doing this will mean you only pay for the tasks that are complete, and there is no need to pay tax, national insurance, sick pay, or any other benefits – it’s just a flat fee. Productivity remains the same as it would be with employees – perhaps even more so as contractors tend to have more at stake – and you will find that your bottom line improves significantly.
While we’re on the subject of productivity, promote it amongst your workforce. Now, don’t take this as an excuse to pay low wages and expect your employees to work longer hours than before. We’re talking about taking positive steps to encourage more staff productivity – be a better boss, and people will be more likely to go that extra mile for you. And it all comes at no additional cost – hence, it improves your bottom line.
Focus on your best customers
Many businesses try to serve everyone well when they are making a name for themselves. But according to the Pareto Principle, 80% of your sales comes from just 20% of the visitors to your website or store. That statistic means that it is likely you are spending a lot of wasted money on finding and serving low-value customers, and you may even be wasting money on them. Focus on marketing to that important 20%, and you will find more of these ‘best customers’ – and you will improve your bottom line.
Cross selling and new services
Another goal of improving your bottom line is to generate more sales while reducing expenses. While this sounds complicated, it’s a problem that can be solved by cross-selling and offer new services or goods that complement your offering. For example, let’s say you are a web designer. You might partner with a local copywriter and start offering a fuller service than you can by yourself – instead of web design, you can also offer blog posts, SEO copy, and product descriptions amongst other things.
Pursue timely payments
Late payments hurt your business finances. So, if you want to protect your bottom line, consider making sure you always get paid on time – and always pay your bills on time, too. Late payments from clients mean you might be late with your customers, and ultimately that results in fees and charges – a needless hit on your bottom line.
Get better deals with suppliers
Once you have proved yourself with your suppliers, it might be possible to negotiate a better deal. In fact, why not take a look at your whole procurement processes and see if you can cut costs in every other area of your business. You can hire people with the right level of experience of negotiation, influencing, and develop relationships with suppliers. Look for agencies similar to Portfolio Procurement in your area, and also check specialist procurement and supply chain websites to find the ideal candidates. Don’t underestimate the significant savings you can make by being more thorough with your purchasing and buying methods – it is one of the areas of your business that can improve your bottom line by a considerable amount.
Cut general costs
While we are on the subject of reducing costs, take a look around at every penny you spend in your business. Everything from your utility bills to office stationery are all likely candidates for saving money and are easy to cut back without affecting your product or service quality. Don’t forget, this process isn’t about scaling back altogether and ending up selling an inferior product or service – it’s about maximising what you already have. Even something simple like making sure all your documents print on one page rather than two can have an impact on your bottom line.
Lose the office
Finally, we live in a world where remote working is an everyday thing for most businesses. So, why not take advantage of it? You could, potentially, reduce the amount of office space you are using by asking people to work remotely instead – which will result in a significant reduction of your monthly rental costs. It’s not just rent you will save on, either – equipment, heating, energy, and security will all cost less when you have fewer employees on-site.
As you can see, there are many ways of improving your bottom line. With a little creativity and hard work, it’s possible to reduce a significant proportion of your costs without affecting the quality of your product or service. Look at your business and see if there are any areas where you can start saving – and you will give it a fantastic foundation for success.