How to improve Your bottom line - Strategy 4 - Cost Structure

Based on our experience supporting small business owners, in less than an hour, we are confident we can find a 10% improvement to Your bottom line.

What’s our secret sauce?

We ask questions. We listen to Your answers on how and why Your business is not performing. We confirm Your answers with Your financials, and look at the key drivers of Profit:

1. Cost Structure

2. Pricing

3. Lead Conversion

4. Lead Generation

We then make recommendations on how to improve the effectiveness of one or more of these drivers.

Let’s look at one as an example – Cost Structure.

It is critical that as a small business owner You are aware of and managing Your costs - both fixed and variable.

It is also critical that Your cost structure is set up so as to provide flexibility

and ability to adapt to whatever the future entails.

Recommendations would be:

  1. Be on top of your cost structure at all times

  2. Look to reduce and lock in any fixed costs

  3. Look to defer any discretionary spend

  4. And if you are reducing costs, make sure that the focus is on securing your business’ near-term viability

The term fixed costs applies to any cost that is necessary on a recurring basis for the operation of the business.

Examples of fixed costs within the business might include:

  • Rent

  • Supplies

  • Debt repayment

  • Payroll

  • Taxes

  • Insurances

Typically, the largest costs for a small business are Rent, Payroll, and Materials / Supplies. At this particular time, these need to be constantly reviewed and where possible reduced.

Examples of potential actions to reduce fixed costs:

  1. Have a conversation with your landlord - this could give you the opportunity to reduce your rent

  2. Review your staffing models to reduce your payroll costs by:

  3. changing the mix of permanents and casuals

  4. optimising staffing based on down times

  5. Review opportunities to reduce staffing, and as a result payroll costs, by automating key business processes

  6. Work with suppliers to reduce your supplier costs

  7. lock in a more favourable price, or

  8. look at alternate suppliers

Variable expenses are those that change depending on how much you use the service. Many of these are necessary for your business to stay in operation, like utilities.

You will also find expenses that are not necessary for the function of your business, but would be nice to have, like education, or extras that can increase profitability. Those are called ‘discretionary expenses’, which you can roll into your variable expenses budget as well.

Some examples of variable expenses are:

  • Owner’s salary

  • Replacing old equipment

  • Office supplies

  • Professional development

  • Marketing costs

During these times, you will need to lower your business variable expenses, beginning with discretionary spending.

Now, it is important to note that not all costs are equal. The focus should be on securing your business’ near-term viability and positioning your business for the medium-term.

Putting it another way, be careful when reviewing and potentially cutting costs. Do not remove all of your sales and marketing investment. Ultimately, your business needs to grow out of this situation by ensuring it has a sales and marketing strategy that increases demand for your products or services.

Would it be worth a 1 hour chat to understand how to add at least 10% to your bottom line? Contact us

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