PORTAL CFO Blog

Reducing Operating Costs: How You Can Keep Your Profit Margins Wide

As a business owner, reducing operating costs is one of your many, many obligations.

It’s also one of your most important.

While this is something that applies to every stage in business, it’s especially important during the formative years when operating budgets are tight and every cent counts.

It may seem like it goes without saying, but it can’t be stressed enough that your earnings need to outpace your expenditures if you want to keep your doors open. So, you want to look at every area of your company and make sure that money is being used as wisely as possible.

By doing that, you can make sure that you’re able to stay on task and can continue to guide your company towards growth and prosperity.

So let’s look at some of the ways you can go about reducing your operating costs so that your short-term business goals are more easily obtained.

Simple Ways to Save

It may seem like looking for ways to cut back on your company’s operating expenses is a daunting task but, as with many large jobs, you simply have to begin by taking small steps.

And part of taking those small steps in the beginning means knowing where you want to eventually end up.

So, you want to start cutting back on your costs by:

  • Setting a Goal – How much money do you ultimately want to save your business? Cutting back on your expenses is a part of running your business that should be as well planned as your general business model.

You want to know where you’re going so that you can lay out a clear path for how you’re going to eventually get there. This can only be done with the kind of foresight that allows you to do things like effectively develop your products and marketing practices.

So, when you start off on your pursuit of lower costs, craft the kind of plan for doing so that you would craft if you were developing an entirely new business.

Goal setting in this context is just as important as it is in many of other areas of both life and business.

It’s important to remember that, as you do develop the plans you want to follow, you leave enough flexibility in them so that you can change something if the situation suddenly calls for it.

So, with that in mind, let’s take a look at some of the specific things that you can do in the name of reducing operating costs and making sure that you’re money is working for you.

  • Invest in Your Employees – When it comes to running a business, your employees are a large part of what makes it work. Not only should you do what it takes to make sure they know that their work matters, but you should make sure that they receive the necessary training as well.

 No matter what industry you work in, the people who work for you should always be learning and growing, so invest in the proper training to reduce mistakes, make sure they have the equipment to do their jobs properly, and be willing to help them where needed.

By investing a little in them now, you’ll be taking steps to reducing operating costs by a large margin in the future.

  • Work With Your Suppliers – Part of running a business involves having to deal with suppliers who sell you the raw materials you need to provide your products and service, and part of being successful at running a business is keeping your diplomacy skills sharp.

So when looking at reducing operating costs, consider ways that you can use your skills in business to business relations to try and get better deals on what you need to make your business run.

  • Look at Your Marketing Efforts – How do you promote your business to potential clients and customers? Whatever your methods might be, it’s likely that there are things you can do to streamline your focus.

If your company has a primary age demographic, for instance, then you may want to focus on advertising through whichever medium that age group gets most of their information.

  • Reconsider How You Use Technology – When looking at reducing energy costs, you want to take a look at the technology your company uses (or doesn’t use, more on that in a minute) and consider how that might be affecting your bottom line.

It’s natural to want the latest and greatest in technology, but are you able to do what you need to with less?

Likewise, are you buying equipment, when renting or leasing it might make more fiscal sense in the long run?

Ask yourself these questions and look at how technology can possibly provide you with the opportunity to eliminate some areas of doing business that might not be as essential as you once thought.

 Part of reducing operating costs also means using technology to make your life easier and nowhere is that more apparent than in communications technology.

 If you have clients that you travel to meet with on a regular basis, considering carrying out your meetings over the phone. If you have employees who are capable of doing their jobs from home, consider allowing them to do so in order to save on office space, equipment and other related expenses.

 These are just some ways that technology can make your life as an entrepreneur easier, but I’m sure you’ll find more if you take a careful look at your business practices.

How It All Affects Business Growth

At the end of the day, these are just a few of the things you can do in the name of reducing operating costs but, whatever you end up doing, you want to make sure that a thorough financial analysis is performed. It will ensure that you cut costs without sacrificing the quality of your products or services.

It’s one thing to keep costs down and margins up, but it will be all for nothing if your attempts at reducing operating costs come at the risk of you losing your customers in the long run.


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