Bringing Up Profits – Part One

This is Part One in a series of three articles outlining how you can bring up profits by addressing the various costs and expenses associated with doing business

As a small business owner working from home or a one-person office, maybe even a two or three-person office, profit is a big deal.

The problem is, when you are small your ability to absorb potential issues that cost and be very, very low.

If you have two or three big contacts and one project takes a hit, can the profit from the other two cover the potential loss?

Maybe, maybe not.

So let’s talk about what you can do now to begin slowly raising your profit margin and start seeing more gains.

The Bringing Up Profits Series

In this first part, I want to look at expenses that are associated with your business.  In Part Two we’ll look at your vendor and outsourced expenses and costs.  Finally in Part Three we’ll talk about your home and personal expenses and how those relate to and affect your bottom line.  Many of these overlap but I’ve done my best to separate them.

Ready?  Let’s Go!

Your Business

There are various types of costs and expenses associated with running your small business.  Whether you have a formal structure like a corporation or if you are just going solo, knowing where all the money goes and how you can better control it means more money in your pocket.

Fixed Expenses vs. Variable Expenses

Your monthly and yearly expenses fall into two different categories: fixed and variable.  Fixed expenses are things like insurance payments and rent payments.  Things that basically stay the same month to month whether you sell 10 ebooks or 1,000 ebooks.  Variable expenses are those that change based on your level of production if you increase sales of ebooks you may have to increase your hosting account bandwidth; if you increase the number of coaching hours you sell you may have to buy more office supplies to support more clients.  Easy.

For Part One we are going to look primarily at Fixed Expenses.

The goal is to keep the Fixed Expenses low even as you ramp up production or sales.  It is, therefore, a good idea to review them regularly to make sure they are in-line with your sales volume.

Utilities

Utilities can be hard to reduce in cost but with some small changes you can accumulate savings that can bring up your profit.  Here are just a few ways to start reducing costs and boosting the bottom line.

• Turn off lights and open the blinds.
• Use a lower watt bulb when you do need lights or switch to energy saving bulbs.
• Keep your computer in power-down or energy saving mode when you aren’t using it.  You can easily set up most machines to go to “sleep” after a certain period of time.
• Keep the computer off on the weekends if it makes sense.
• Adjust your thermostat.  I keep it cooler in the winter by 2 degrees and keep a sweatshirt in my office in case I do feel cold.  In the summer I keep the thermostat up by a few degrees and keep my ceiling fan on instead.
• Unplug chargers or items that draw electricity even when not in use.
• A good rule of thumb is to be aware of your usage and adjust.

Insurance

Insurance can be expensive but if the provider you are currently using isn’t extending discounts it might be time to make a change.

There are so many online ways to shop for insurance that it can be a fairly easy task to get quotes for auto insurance, liability insurance, health insurance, etc.

Shop around.  Ask for discounts if you have more than one kind of insurance that can be provided from the same company.

Remember that loyalty is no longer a factor.  I’ve been with the same provider for 18 years and it hasn’t saved me much.  A quick look at some other options found that there were some pretty substantial savings available to me so I will be making some changes this month.

Health Costs

One way to save on health costs is to raise your deductible but another way includes making sure you are using the services only when you need them.  Research shows that far too many people run to the doctor for every sniffle raising costs over time.

Get moving!  Getting out for some exercise regularly can greatly reduce your health costs.  The more you move the healthy you are.  You increase the effectiveness of your immune system and that leads to fewer sick days.

Once I took up running regularly… I stopped getting colds and the flu and any ol’ bug than came around.

Of course there’s the trickle down effect… no colds no added expense of buying Kleenex and Nyquil.

Advertising and Marketing

How are you currently using your marketing budget?  On-demand printing may be the best way to save money on your advertising and marketing costs.

Instead of buying a box of brochures or flyers why not print on-demand when you know that you’ll need them?  It may seem more expensive to buy only one printed item than 20 or 30 but how much more expensive if those extras are going in the trash because something changed.

Business cards are another wasted expense.  Far too many are printed and far too many tossed.  Save by reducing the number you have printed at any one time.  Use an on-demand printer like Staples or Officemax who can provide smaller quantities. Use low-cost online places like Moo.com.

No one really needs pre-printed letterhead.  Using free software, create and print your own.

Dues and Subscriptions

How many magazines do you really need?  Worse yet… do you even read them?

I went on a subscription diet last year.  I was subscribing to everything because individually no one magazine was all that expensive.  I had stacks and stacks of unread magazines.

I stopped them all.  Savings per year $100.  Now I go online and read on my iPad.

Are you paying monthly fees for forums you never visit?  Stop now!  If you haven’t been in those online places in a full month, they aren’t doing you any good.  Worse yet, the longer you stay away the less likely they are to be of benefit because the conversations move too fast.  If you need support opt for free ones.  There are better ways of networking!

Everything Else

We’ve looked at just a few of the Fixed Expenses every business has and we’ve looked at ways to reduce them.  Although we covered some big ones like utilities, insurance and health care, there are many other fixed expenses that are specific to your business type.

Review them all, one by one, then figure out if you really need to incur the cost or if you can find a cheaper or even free solution.

Be diligent and you’ll see your profits slowly rise.

Next week we’ll look at the Variable Expenses your business has and talk about what you can do to bring those costs down, especially as you grow.