How to Reduce your Growing Business Expenses.
There are two ways that businesses can increase their profit margins. Either increase revenue (by selling at a higher price or selling a larger volume) or cut down expenses or do both simultaneously. In our last post, we discussed how to go about fixing the right prices to make sure that your business does not lose customers or brand value.
This time, we suggest some ideas to cut down costs in your small business. This is not an exhaustive guide, but our plan here is to seed the thoughts to help you be more profit conscious as a business.
01. Learn to Negotiate.
Most of the time, you can pay less if you have mastered the art of negotiation. Be petty about, there is nothing to be ashamed of. Always compare the prices of goods and services before you pay for them.
“If you have not been to two different bazaars, then you do not know what the best value is.” — Ancient adage from Burkina Faso
If you already have a fixed supplier for your products, ask them what discounts they can offer you. If they are not willing, there is no law that binds you to one supplier if you can get those items at a lesser price, pride in this case comes before the fall of your profit margins. Just make sure you put into consideration the whole package — time of delivery, quality and value added.
02. Partner for Profits.
We move the biggest weights when we do it together. One way to cut down costs as a growing business is to create a mutually beneficial relationship with another business that complements yours.
if you stand alone, you can easily be broken, but if you remain united, no one can break you. That is why each stick of the broom is only a fragile piece of a vulnerable material. But when they are all tied together they are very strong and unbreakable. The weakest is only so because it stands alone from the bunch.
WiiCreate uses this strategy to cut down on the cost of production, making their customized T-shirts affordable. They partner with one of the biggest factories in Lagos to supply them with the ready-made Tees on demand. This long-standing relationship gets them a consistent quality of shirts at a reduced price.
This is a throwback system of getting what you need without spending money. You exchange your services for the services of another business that you need instead of cash.
For instance, if you run a car repairs business and your business needs a website, you can collaborate with a website design company to repair their cars for a period while they create your website.
The downside to this is finding a business that provides the service you need and also needs your services. Also, there is the challenge of quantifying value, branding your services as products helps to make sure that you know just how much the service you are exchanging is worth.
04. Advertising on a Budget
Marketing your small business should not put a hole in your pocket. Your small business does not need a big advertising budget to get word out to interested customers. At Triift Africa, we believe in achieving more with less, by doing the mental work needed to drive growth rather than taking the easiest (usually expensive and non-converting way out).
Have you read:
how to get started with marketing your small business
how to fix prices in your small business
how digital technology is changing farming in Africa
05. Buy Fairly Used
If your business needs to make a capital investment, for example, buying a machine or van for business, consider fairly used ones. Be careful as not to buy nearly damaged products. If necessary, talk to someone who is experienced with purchasing that equipment or gadget.
06. Trim your Payroll
Can you really afford to pay 3 full time employees with full benefits?. It is wiser and more cost effective to employ the services of freelancers. Paying a freelance agent means you only pay for the value they offer without having to bother about taxes, health insurance, and idle time. If you need accounting services for your business, Triift Africa has you covered, talk to us.
07. Save on Rent
If you pay rent for a big space you don’t use maximally, consider getting a co-tenant to split the rent costs. You can always use a smaller space with better organisation or design your space for multiple uses.
If you have employees, consider letting them work remotely. This saves you the cost of renting a space and saves them the transportation costs as well. Also, save on electricity costs by turning off appliances when they are not in use.
Which of these methods would you apply to your business? Which ones have worked for you in the past? Hit us in the comments.
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