Profit is the life’s blood that keeps your business going. On its most basic level, figuring your profit is as simple as subtracting expenses from revenue. Many companies fall into the trap of looking only at the revenue side of the equation when they wish to increase profits; however, there are two variables to consider. Cutting unnecessary costs is an effective way to increase profits – as long as you make cuts in the right areas.
Spend Less on Operating Expenses
Unless your company employs an aggressive purchasing manager, you may consider the prices you pay to vendors as fixed expenses. In reality, your vendors are just as in need of customers and revenue to drive their bottom lines as you are. To cut expenses, examine how much you spend on:
- Office supplies
Even if your business isn’t large enough to command hefty corporate discounts, you can still shop around for new account incentives. For example, if a new shipping company is willing to give you 10 percent off what you currently pay to switch to their service, it’s worth asking your current shipper to beat the rate. Best case, your current vendor matches the discount; worst case, you switch to the new vendor. Either way, you still spend less on your basic operating expenses, increasing your profit margin.
Focus Sales Efforts to Make More Money
Increasing sales is another way to increase revenue. But in some cases, this may include increased travel expenses to get in front of your potential clients to close pending deals. Between airfare, lodging, meals and the expense of wining and dining new customers during visits, sales calls become expensive – expensive enough that they can outweigh the value of the sale itself.
Rather than letting travel expenses eat into your profits, consider:
- Scheduling midday appointments to avoid overnight stays
- Utilizing virtual meeting methods – like conference calls and video chats – to avoid non-critical travel
Spending less on travel expenses has a hidden benefit to help your sales team make more money. Let’s examine what happens when an employee schedules an out of town sales call for first thing Tuesday morning. Your employee:
- Spends Monday morning prepping for the meeting
- Flies out Monday afternoon
- Stays in a hotel Monday night
- Schedules a client dinner for Tuesday night after the meeting
- Stays in a hotel Tuesday night
- Flies home Wednesday morning
- Spends most of Wednesday recovering from jet lag and catching up on email
In addition to the travel expense, your salesperson just lost three days of productivity to close a single new client. How many more potential new clients could each member of your sales force contact by cutting down on travel and gaining an extra two days in the office? Phone calls, video conferences, online presentations and other alternatives to travel can be very effective. Having more time to contact more clients can equal big revenue increases. Not only can this simple strategy help you spend less on travel, it can help increase sales.