07/29/2018 – By Jason Smale
There are a few key elements that go into successfully managing your business venture. One that is often overlooked, and will be the detriment of your business, is how you manage the finances. Many promising companies find themselves crushed by the weight of debt after the first and second year because they failed to adhere to budgets and regularly evaluate the expense of their business.
Below, we outline 10 simple things to look for in the evaluation of your business and how you’re managing the expenditures of your company.
Use organic search rather than Paid Acquisition.
We recommend being strategic in your online advertising investments. Many entrepreneurs get steered in the wrong direction here by spending countless dollars on Facebook, LinkedIn, and Google ads campaigns to grow their brand awareness. We recommend that you make smarter investments in your advertising budget. Consider instead of online advertisements, investment in advanced SEO techniques, such as content marketing, link building, and optimizing your website for both direct and indirect page traffic.
Where possible, eliminate the use of printing and mailing documents, when digital files can be used for email or fax. This will eliminate the paper, printing, and stamp expenses, as well as the need to replace cartridges and expensive printing equipment periodically.
Make it an annual practice to review the pricing of everything including landlines, wireless, internet, and equipment rentals. Don’t discredit the growing popularity of VOIP telecom solutions for your business, paired with a local DSL service provider, you can find up to 50 percent in savings on your telecommunication and internet service contracts.
Transition your IT solutions to the Cloud
Transitioning your digital files to a virtual environment accessible from anywhere through the internet, and transitioning from internal server equipment and stationary desktops to online cloud-based servers, not only frees staff up to be more mobile but will eliminate the need for upgrading equipment every couple of years and can minimize the need for on-site IT service providers.
Service agreement discounts
You’ve heard the phrase “cash is king”, but in business, it couldn’t be a truer statement. The Operating Cash Flow of your business is a crucial element for you to manage. Negotiate terms; where possible, with vendors, for discounts up to 10 percent off bills for early payment.
Remember, if creditors are not offering discounts for early payment of your contracts, then paying bills before the net terms is a restriction of operating cash flows.
Save energy costs
Eliminate increases in energy spikes and strain on the system. If you run high energy-consuming equipment, avoid turning all of the equipment on at one time and causing an energy spike. Instead, stager the setup of equipment. Also turn off equipment when not in use, an example would be ensuring all lights and computer systems are turned off at the end of the day. Switch to energy efficient lighting systems
If you can justify the cost in your budget, consider getting an energy audit performed. A professional auditor will come in and audit your current energy usage and requirements and deliver energy saving strategies that you can use to reduce both your carbon footprint and unnecessary energy expenses within your business.
Evaluate product lines and services
It’s important to keep an eye on the production costs and/or service times required to complete the sale of a product or service. Understanding which products and services offer you the greatest margins will help you create a better focus, it will also help you understand when you have a product that is a poor performer. Consider cutting poor performing products/services from your offerings, unless they are being used as a lead for products and services with greater margins. In the case of the latter, make sure you evaluate your processes in order to find more efficient ways to deliver your product or service, reducing your costs and increasing your profitability.
Manage and Minimize overtime
If you find your business needing more man-hours than your current staffing levels can provide, evaluate whether this need is a short-term or long-term need. If the need is only for a few weeks at most, over-time may be warranted, but if the need is part of the organic growth of the organization, and you can reasonably anticipate the need will remain in place, start by hiring new staff on part-time status. Over time, you can transition the right staff members into full-time employment as they prove their value to the organization and the demands of the organization warrant it.
Asset evaluations and management
If your business requires the use of expensive equipment or machinery, regularly check your KPI reports for things like the asset utilization ratio. This will tell you how effectively you’re using the assets within your business. If you find that a piece of equipment or machinery you own is not generating a reasonable earning for your business we recommend you evaluate the need your business has for keeping this asset.
Sticking to your budget
One of the more important factors in strategic business management is establishing and managing an operational budget for your business. Establishing a budget goes hand-in-hand with the strategic vision of your business. Once you’ve established a vision for the business, it’s important to establish the financial goals and the corresponding expenditures you anticipate incurring to achieve these goals. Businesses that establish budgets and work towards sticking to their budgets increase their probability of success.
Word of Caution
Some business owners find themselves striving so hard to cut costs in their business that they fail to evaluate the difference between an expenditure and an investment in the growth of the business.
Contracting outside professionals to help with the management and growth of your business can be a wise investment. Retain the right marketing agency to establish branding, an accountant to assist with the financial management and tax savings, or a lawyer for drafting up important contracts; these are a few areas where we suggest that entrepreneurs not attempt to save a dollar at the expense of thousands in savings or missed opportunities.
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