You got your business up and running, but now you face the challenge of keeping it afloat. How do you grow your company while keeping your costs down? This is a question that plagues many business owners, especially those that are self-funded.
A business owner faces an uncertain time when their enterprise begins to show signs of success. How will you provide for increasing demand for your product or service while keeping your overheads at a minimum so that you can get out of the red and into the black without going into debt?
The answer is to run your business on a lean basis. Here are some ideas:
Look for functional solutions
There’s nothing quite like the rush of adrenalin you feel when your business starts turning a profit. Suddenly, you’ve got cash to spare, and it’s easy to give in to the temptation to spend it on things you don’t need. Even if you’re starting, think about ways you can save money by spending what you have wisely.
Your business needs equipment to run. But does it need the best and most expensive equipment ever? The answer is probably no. You don’t need new filing cabinets and office furniture. You can buy refurbished computers instead of new ones. The business can carry on operating out of its original premises for a while longer as you build up cash reserves.
Focus on the process
One of the most significant ways in which companies waste money is in the processes it runs. They are often cumbersome, or they might be so unregulated that it doesn’t appear that there is a process at all.
According to Peter Peterka, principal consultant in practice areas of DMAIC and DFSS, global six sigma is a vital part of streamlining processes and making them run efficiently. It is a methodology that uses data-driven research to define goals and determine how best to accomplish them. Using this approach, you can decide whether or not you are using resources at optimal levels to save costs.
Use human resources sparingly
Most successful business owners spent the first stages of running their businesses doing everything by themselves. Once things start picking up, you will need some help to maintain your daily operations. But before you start hiring, think carefully about how much help you need.
Salaries are often a company’s highest expense, and much thought should be put into the hiring process. Spending that much money on hiring someone who isn’t going to contribute to the growth of the organization is a waste.
If you cannot justify the expense of full-time employees, consider hiring part-timers or freelancers. It will cost less, and you can use their services only when you need them. Don’t go to the other extreme by not taking on any help at all. When you’re stuck doing everything alone, you won’t have time to focus on growing your business.
Take advantage of cost savings
When you buy equipment, materials, and consumables, you can pay a reduced price for buying in bulk. By keeping a healthy cash flow, you can take advantage of these offers. You can also find out about discounts offered for settling bills early. These may seem like small savings, but they all add up and build on your bottom line.
There’s a balance to be maintained here, though. If you take advantage of discounts on bulk purchases of stock, you could wind up with dead inventory that you struggle to move.
You’ll end up having to sell it at a reduced price, which will result in a net loss. Always approach deals like this with caution, and make informed decisions when it comes to choosing to take advantage of them.