We all know the accounting equation. Increasing profitability requires more revenue, reduced operating costs, or a combination of the two. Needless to say, many business owners and managers feel overwhelmed. It’s entirely possible to increase sales but lose the profit advantage because costs rose along with the rise in revenue, or even exceeded it. Cutting costs without carefully considering the implications could mean that the business has less capacity to serve its clients. With reduced revenue, the profit margin businesses may have hoped to benefit from fails to materialize. Feeling stuck? These tips can help you to reduce operating costs and boost capacity at the same time!
1. Automate and Hyperautomate
Hyperautomation is automation taken up a peg. Here’s how it works. These days, most businesses know that repetitive tasks and workflows can be automated, and several areas have proved fruitful ground for automation. But what about automating processes that you always thought required human intervention? With advances in AI and machine learning, it may just be possible. The fewer routine tasks your people have to handle, the more they can focus on tasks that only a human can do. The necessary tech pays for itself, and from there on, your investment generates returns.
2. More Remote or Hybrid Work
Office space costs you money. With remote and hybrid work becoming ever-more feasible and with staff enthusiastically supporting the concept, it may be possible to reduce your office space substantially. Pure remote work can cause undesirable distancing between employees and their employers, but hybrid work allows for regular as-needed contact interspersed with remote work .
Outsourcing may sound like “old news,” but with more and more business functions becoming open to outsourcing, it’s worth reevaluating the costs of doing things in-house. Since outsourcing passes on non-core tasks to companies that specialize in them as a core business, you can often realize greater efficiency at lower costs. Identify the core areas of your business and look at outsourcing opportunities for everything that falls outside the specialty that generates income for your business.
4. Get Suggestions from Your Staff
If you’re looking to minimize unnecessary expenditure, you may find that your operational staff have some bright ideas. In the course of their work, they may have spotted areas where time or money is wasted. Pay close attention to the suggestions you get, even if they seem outlandish at first glance. Be sure to provide thanks and positive feedback that shows your appreciation of their ideas, even if you don’t think they’re worth implementing right away if at all.
5. Negotiate With Your Suppliers
As a business person, you know just what your suppliers cost your business every year. The cheapest option isn’t always the best one, but it’s worth checking out alternatives. If you’re a big customer, your existing suppliers may be eager to keep your custom and be willing to charge you less.
Other areas for negotiation include early settlement discounts. You pay promptly, and your suppliers compensate you for the savings they realize thanks to your early payment. Retailers are expecting more of their suppliers these days too. So, if you’re in retail, see if your suppliers can be persuaded to do their own merchandising or else offer you lower prices because they don’t offer this service.
Whatever you do, don’t let narrow profit margins and high costs leave you feeling helpless. With some creative thinking and a new approach, you can dig yourself out of a stressful situation and set your business up for success.