When a company is trying to increase profits, they can simply increase the product price or they can reduce the costs of what it takes to create their products and services. This is a sure way to save money on your company’s behalf. The cool part is that once these products/services are sold, you will have a much greater profit margin. Sounds good, right?
The tips below give you ideas on what you can do to decrease the cost of creating your product. Remember, creating your product/service for less gives you the opportunity for bigger profits once your product/service is sold to the public. This is why it is important for small businesses to spend as little as they can on product creation–especially when you have a new business.
1. Pick cheaper packaging. This includes containers, labels, and ink. Depending upon what kind of product you sell, you may be spending more money on your packaging than you do the product itself. Shop around for the best deals while buying wholesale. Also check the size of the items. Sometimes an item is cheaper because it is smaller, so pay close attention.
2. Eliminate ingredients. Let’s say that you have a special all-purpose cleaner that you are selling. If you want to reduce costs on creating this item, you may have to eliminate some of the ingredients that are in the product. There may be ingredients that are inactive and doesn’t necessarily have to be in the product. Or maybe the inactive ingredients are costly. If this is the case, find the same ingredients for a lesser price or simply eliminate some of them altogether. If it isn’t essential to the functioning of the product, get rid of it.
3. Reduce equipment costs. The cost of business equipment can be extremely high. However, it is essential that you have it in order to conduct your business. The best route to go on this is to buy the best quality equipment for the lowest price possible. Some of the equipment that you have may be up to date, but they are also expensive because of it. Check to see if there are any older models that you can use that will get the job done just fine. When it comes to technology, you can save hundreds of dollars by buying a model that is just a couple years old as opposed to a new one.
4. Pay your employees a little less, or hire less people. Unfortunately, some employers have to take this option. Some of your employees may be slightly overpaid. Small business owners tend to pay their workers reasonably well because they value the assistance they get from their employees. But if you are trying to reduce costs for the sake of your business, you may need to reduce their pay. It can be by as little as $.25 an hour, but all those quarters will add up and result in great savings. You may also need to lay off employees that are not contributing to the success of the business. It’s a difficult option, but sometimes it has to be done. For more tips on this read, How to Fire an Employee (With Dignity & Respect) .
Saving money in your business can be a little tricky because so many of your expenses may appear to be completely necessary–even mandatory. But once you take a closer look at what your spending versus what your profiting, you may find that there is a definite need to reduce some of your expenses. You can get more tips on reducing costs from The Agile Manager’s Guide to Cutting Costs by Jeff Olson. Also, A Checklist for Strategic Cost Cutting | Entrepreneur.com . Hopefully this article gave you 4 great ideas on how you can reduce expenses, therefore freeing up much more money to invest in more profitable entities. Good luck on your business.
