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Managing Costs for Better Business benefits
Let's look at a simple scenario, where a cost reduction of 15% to 60% can lead more benefits or better.
We will have a sham:
This business generates $ 100,000 per month in revenue. It has a monthly gross margin of 50% or $ 50,000. It's monthly overhead (salaries, rent, utilities, marketing, etc) is 40% of their income or $ 40,000. The company pays $ 1,000 per month in interest charges and has a rate of 10% of net taxes. Under this scenario, the company would obtain a net profit of $ 8,100 for month.
Now let's say this company was able to reduce their overhead costs by 15% (from $ 40,000 to $ 34,000 – a reduction of $ 6000). Holding all else equal, the profits of the company would rise to $ 13,500 in the month – an increase of 67%.
How one company reduced its costs in this way? Any way you can. I suggest taking your bottom line and looking at any and all expenses – item by item.
When looking at these articles, I think: 'Are there any fees that may be eliminated or reduced? Now, I'm not suggesting a reduction of costs related to your business principal. But, you may be costs that are not central to its operations, which can be reduced.
Look at their facilities. Are you using all the space you have? Can low for a smaller building or space? Can you find a center that includes utilities for the same you're now paying rent? If you own, you can isolate the unused space? Can you rent it out and share the costs of public services? Can refinance?
Look into their profits. Can you open windows instead of running the A / C or heat? Can you turn it down – but only a few degrees – during off hours? "You can close the ventilation ducts for areas that are not used or rarely used? Can you replace light bulbs light or use sensors to turn off the lights when no one is in a room?
Browse other office costs? When was the last Once you bought your phone service, Internet service, or your insurance? Can I use VoIP instead of traditional phone lines? Do you have a line independent fax can be eliminated? Are you using expensive shipping services may be temporarily interrupted or reduced by the use of another company?
Look at its sources. Are there areas here that can be cut? Cheaper to buy office supplies, for example, no name brand paper, printer ink, paper clips, etc. Buy in bulk discount prices? Get discounts for cash payment or payment.
Stay home meetings. Can I use conference calls or meetings software remotely to save on travel, accommodation and living expenses? Look at companies as WebEx.
Looking at the market. I am not suggesting in any way you cut marketing. However, you can look at this expense item to determine if you are getting the best bang for your buck. Is your marketing to the most profitable customers? Is it aimed at its most profitable products and services? Can the common market with an adjacent shared advertising costs? Are you looking to collect customers to competitors who have gone bankrupt?
Finally, go to their suppliers or vendors. Ask an immediate 15% to 20% price reduction. These companies also suffer because of our current economy, rather, for the most part, to keep you as a customer to a reduction Price after losing their business altogether. If you do not ask or do not shop around, you will not see any benefit.
Remember, all the little things you can really do is add in the long term. Think about our fictitious company over a small reduction of 15% increase in the cost of your net monthly income by 67%. Also, if the revenue of this company were to fall during these difficult times, it could fall almost 12% overall and maintain current net profits, provided it finds the cost savings of 15%.
It is up to you!
About the Author
Joseph Lizio holds a MBA in Finance and is founder and owner of www.businessmoneytoday.com
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