While economists have argued that the main aim of a business should be to administer goods and services that can satisfy a customer, everyone agrees that making profit is a reason that can not be overlooked. The definition of “business” according to businessdictionary.com:
An organization or economic system where goods and services are exchanged for one another or for money. Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit.
When you have gotten through the hurdles of starting a business, and your business has begun to thrive, and you even begin to notice some consistency in your sales volumes, you get to a point where you need to move other variables in order to kick the profit margin up another notch.
Here are 3 out-of-the-box ways you can cut costs to maximize profit in your business:
1. Optimize Your Workforce
Now there are several ways to optimize your workforce and derive the maximum output from least input:
- Contract Staff – Conventional full-time staff sometimes have a lot of down-time where they aren’t really doing any work, but you are still paying for that time. It would be more efficient to hire staff that would be paid per hour and work done, after all, efficiency is the ratio of the useful work performed.
- Unused Workforce – Most hiring businesses want experience even for jobs that do not require enormous skill. If time is money, then experience is the dollar bill. That being said, there is a multitude of untapped human resources to be fished from the inexperienced pool, from fresh graduates who are just looking for the experience, to undergraduates looking for internship positions, to people with disabilities that are still capable of doing the work. What these groups of people have in common apart from the inexperience is that they are likely to work for less.
2. Pool Resources
Some businesses in Nigeria are already using this strategy, but it is not still being explored nearly enough. You can go to other businesses like yours in the same industry who purchase from the same suppliers as you, find one supplier with the lowest price, work out an agreement for him to supply all of you at a discount due to the volumes you would be purchasing. Most suppliers would jump at the idea of bulk purchases, but you should consider rotating the suppliers just to have some competition and maintain buyer power.
3. Split The Rent
If you live in and/or run a business in any big city then you can already relate to this. Rent, most of the time, is the biggest bother when thinking of expenses, but there are a few ways it can be managed better;
- Share Space – You could have a whole lot of space to your business that you do not need, but again you are paying for all of it. So why not let someone else take the burden off you; you could sub-lease some of that space to another business that is unrelated to yours so as to avoid a conflict of interest with customers and reduce cost as well. You could also look for another business with a lot of space that you could attach yours to for a smaller fee.
- Get Rid of Space – You could altogether get rid of the whole space, especially if your business is one that could be run from home. Everything is going digital now and so you could implement processes which allow your workers to work from home. With the boom in online stores and online salespeople, there’s no limit to the possibilities of the internet, and so conventional offices might just be a waste of space and money.
In summary, you can increase your profit margin by growing your top line revenues, or reducing your costs. These are just a few ways that you can grow your profit over a period of time when sales might seem stagnant and you are stomped on what to do; cutting costs always helps.
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