Every business needs money for growth. It doesn’t matter if it’s an online company, such as 22 Bet or Netflix or a local store. But how do you get more cash? The best way is to decrease costs, and these six tips will help you.
Cut out the Unnecessary
According to the Pareto Principle, 20% of the effort we spend to get a result yields 80% efficiency. Conversely, 80% of the effort yields only 20% efficiency.
This means that you need to focus on efforts that get you the most, and get rid of the rest. Ask yourself the question: what 20% of the ideas will provide 80% of the cost savings?
For example, you have a consulting center. You and your staff regularly go to meetings and make presentations. You do that with all your clients, but do you have to do this with all of them?
You can improve your work and divide your clients into three categories: clients of “high value”, “medium value”, and “low value”. The first category, for example, would include clients who bring in more than $5,000, the second from $2,000 to $5,000, and the third less than $2,000. Accordingly with the category, you decide how much effort to spend on each of your clients.
Now you spend a lot less effort on clients with less value and cut down on travel, meeting arrangements, and so on.
Shift the Cost to Your Clients
The next time you go to Ikea to buy a cabinet, take note: you’re not buying a finished cabinet, but parts and instructions on how to assemble it. The manufacturer doesn’t pick up the cost of assembling and delivering the furniture and saves money on that.
You can do the same. Sell a product with home delivery? Make a self-checkout location. You spend less, and the customer will buy cheaper. Open your own cafe? Enter the self-service: let customers approach the barista and order drinks and desserts. This saves you on waiters.
Turn Costs into Profits
Yes, you can do that too. Take a marketing agency as an example. It’s incredibly client-focused, so the website has a form where you can ask questions about marketing.
Questions are answered by specialists, who are paid on a salary. Accordingly, they have to work more, and you have to pay for the extra hours. In this case, the expenses are not recouped in any way.
So, the agency introduced fee-based consulting instead of free answers to questions – so what used to bring only expenses, now brings a penny to the piggy bank of net profit.
For example, The Best is a software development and maintenance company. The owner decides to cut costs by taking the load off the full-time programmers and outsource some tasks to cheaper specialists.
When certain segments of the work became cheaper, the costs naturally decreased – now you can keep two programmers on staff instead of four.
Shorten Deal Cycles
Don’t stretch the time between ordering and shipping, shipping and selling. Let’s say we have a luxury clothing store. If we procrastinate getting clothes into the store or order them late, we run the risk of not selling the product. It will end up piling up in the warehouse and becoming less and less relevant.
Shorten the transaction cycle as much as possible and try to sell goods promptly so as not to let them sit idle in the warehouse and take up space.
Keep It Simple
When a company has too large an assortment, costs are high and the product gets lost in the overall variety. For example, Apple doesn’t produce keychains, pens, cars, phones, and laptops at the same time, but focuses on specific product lines. You can see the result for yourself: the iPhone has long held the position of sales leader in the phone market.
Do not spend money on the release and promotion of diverse products, and with it the bloated staff and marketing. Invest in the promotion of a few products and make them truly popular.