Curb Your Business Expenses
Business expenses are broken down into two categories-- fixed and variable. Fixed expenses are the core expenses that don’t fluctuate. Fixed expenses have a monthly payment commitment, a contract, or an agreement, and require a specific payment amount. Variable expenses are those business expenses that vary, or change, and aren’t essential to keeping your business running. The management of both expenses and the way to curb your business expenses boils down to tracking.
Every business is its own entity, so there is no formula that works for every business. It would be easy to look at the highest things on your expense sheet and cut them, but that would not solve the problem, because every business has its own pattern and process. As a business owner, you must be willing to track your business, how many customers do you have, how much do you spend on advertising, how many people are visiting your website? Answering these questions will help you to evaluate what to cut. Avoid cutting the things that separate you from the rest of those in your industry, for example, a Lamborghini dealer that offers complimentary coffee in their lobby does so because that expense is led by their mission statement. They may, however, have a variable expense that doesn’t add value, or that can be cut back, such as their second receptionist.
Business owners tend to focus on their variable expenses in order to change them, but the core expenses should also be looked at. Can you reduce the amount of your electricity bill, the rent, can you reduce a fulltime employee to a part-time employment position, which will also save you on benefits. Make cuts that are unnecessary or repetitive, don’t just cut hours or benefits for the sake of doing it, cut back on things that waste money. Comb through your fixed expenses and determine what expenses are many not actually core; if your business can run without renting out space, without a landline or multiple phone numbers or websites, eliminate those things and save a significant amount of money.
As far as curbing your variable expenses goes, track things such as your advertising expenses. How do most people find out about your business, from where do the majority of the referrals come? The advertising avenues you use that don’t return a good deal of customers should be eliminated and those funds allocated for something else. Make sure your dollars are working for you at all times.
Have something you want to learn about or something you want to share with other business owners? To be on the ‘Ask Christina First’ radio show email me at [email protected] or call 626.844.8842.