5 Ways to Cut Costs and Increase Business Revenue
While it’s true that the risk involved with running a digital business is lower than with traditional brick and mortar businesses, there are still some challenges that online companies share with every other type of enterprise. And the most important of these is the need to manage costs against revenue.
This is Business 101, but that doesn’t mean it’s easy. In fact, the number one reasons small businesses fail is improper cash flow management, and this almost always arises from a failure to manage costs. Yet to grow your business, you need to invest in it. You need to invest in a team, as well as in marketing, customer service and product development. But you can’t just throw money at things and hope it will all work out. You need to be constantly balancing investment with return.
Integral to all of this is understanding the difference between income-producing and non-income-producing activities, which, as you might suspect, comes down to the ability of a certain function to produce revenue. This is because the secret to cutting costs and boosting profits lies in cutting back on some of these non-income-producing activities so that you can direct more funds to that which will actually help the business grow.
This is the process of optimization, and to help you get started on it, consider the following five ideas:
Avoid Hiring Until the Last Possible Moment
Hiring people is expensive. Not only do you need to pay their salaries, but you’re going to need to offer them all sorts of benefits to keep them engaged and not searching for other opportunities. This could include health insurance, paid time off, a retirement plan, and much more. Furthermore, you will need to spend money upfront recruiting so that you can be sure whoever you do hire will provide to the business what you’re hoping they will provide.
And while the day will come when you can and should hire people on first time, try to resist this urge for as long as you can. Think of ways you can reorganize your workflow so that you can handle increased volume on your own, or maybe adjust your timeline so that things don’t need to happen all at once.
This will help make sure your business is fully optimized before you incur increased labor costs, something that will help you derive more benefit from expanding your workforce.
Make Use of Contractors and Freelancers
One way that you can help delay hiring people is to bring in contractors and freelancers. There are highly-skilled individuals out there who will offer their skills to you on a part-time basis for a reasonable fee. And because they are only paid for the work that they do, and because you don’t need to pay them benefits, you can save a lot of cash while still growing your business.
But freelancers can do more than just help you out. Sometimes they can play an important role in bringing your business to new heights, largely because they are able to look at the company using an outsider’s perspective. As a result, whenever you’re considering making an important step in your company, spend some time looking for people who may be able to help you. Getting a fresh set of eyes to look at your problem can end up being a rather inexpensive way of innovating and remaining competitive.
Implement a BYOD Policy
Another thing you can do to try and keep costs down is to use a BYOD policy, which stands for Bring Your Own Device. This is especially important after you start hiring people, as it will help you keep overhead down. You won’t need to worry about supplying people with phones or computers, and if you extend this to be a remote policy, then you won’t even have to spend on internet connections and office supplies.
Furthermore, there are lots of services out there that you can use for free that allow you to make the most of this type of policy. For example, Slack makes it really easy to communicate with people without using their personal numbers, and most of the software you use, including WordPress, Shopify, and Amazon, all have robust apps that will allow people to do their job while saving the company money. And most people prefer to use their own devices anyway, so in this scenario, everyone wins.
Automate Where You Can
Another thing you can do to optimize your business is implement automated solutions. This is useful because it will allow you to focus on growing your business without having to worry if your backend systems can keep up.
A good example of this in action with digital businesses is an automated CRM platform. This software collects data about all of your customers and organizes it on an individual and system-wide level. This can expose trends in your customers’ behaviors, which you can then use to better target them. To give you a better idea, this software can identify commonalities amongst those who come to your site and bought something. Then, you can use this information to develop a strategy that will get them to come back and buy something else.
Of course, you could do all of this on your own by going through website statistics and order history, but that is just going to eat away at your time and money, so the better solution is to automate this process and the reap the rewards that decision will no doubt bring.
Cut Back on Utilities
Lastly, one thing you can be looking to cut back on is the amount you spend on utilities. And the one you’re going to have the best chance at reducing is likely rent. Office space is nice, but ask yourself if it’s really necessary for your digital business? And if it is, could you get away with a smaller space?
One of the ways you could facilitate this change would be to embrace a remote working policy. This will reduce the need for an office, and it will allow you to switch to something more affordable without placing an undue burden on you and your employees.
But cutting back on utilities doesn’t just deal with office space. For example, as a digital business, you likely use and subscribe to many different online services. Take some time to audit these to see if they are really providing you with what you need to do business. You’ll often find that you’re paying for something you could live without, or not paying for the right things, and making changes here can really free you up to continue growing the business.
While it’s important to frequently perform a full-scale audit of all of your systems and processes, it’s equally if not more important to add evaluation into everything you do. Be firm about ROI, and don’t go spending a bunch of money on non-income-producing activities. And always ask yourself if the money you’re spending is going to get what you want.
About the Author: Kevin is a Florida based digital entrepreneur. He also runs several businesses but his main focus is Broadband Search, a website designed to help people find the best value internet service provider in their area.