Beyond the cash that you use to buy commodities for sale or equipment to render services, business costs can be anything from the transport fare that you use to get to your store or the money spent on purchasing data to attend to your customers on Instagram. Running a business is an experience that requires not just business acumen to seal deals and get good opportunities for growth but also money managing skills that will keep your business (and you) above the water on rainy days.
Did I just hear you say that you do not need to cut business costs? Haha, do you even realise how much you have spent on bank charges alone in the past year? It is little costs like this that chip away at your profit and adds up to a huge amount at the end of the day!
So yes, you do need to cut business costs and not just for the rainy days but to learn good money management skills that will sustain your business long term.
Let’s get into it!
- TRACK YOUR FINANCES
The first step to cutting business costs is to know what your business costs are. Every penny that you spend from your business accounts must be accounted for, down to even bank charges, transport money or that N50 you used to buy gala when you were hungry at Balogun market.
A good way to track your expenses and finances is by using accounting software that automates this process for you. However, if you are a small business that cannot afford to spend money on this, I recommend using an expense tracker app like Wallet which you can download from your phone’s app store. The flip side to using an app like this is that it is manual and requires you to enter data every single time.
Therefore, I will also recommend issuing an invoice for every purchase that you get from customers. This helps you track not just the money going out but the cash coming into your business. A good invoice system that you can use is this free tool called Mudsuite invoice. It is easy to use and helps you to keep track of your customers, payments and even debts. You can try it out here.
- REMOVE THE EXPENSES YOUR BUSINESS SHOULD NOT BE TAKING CARE OF
I strongly believe that your business should not be responsible for taking care of your personal needs (unless you pay yourself a specific salary). This helps you to be conscious of keeping your business cash separate from your personal cash.
I once heard a friend of mine declare that he was going to use his business money from a huge, successful sale he had to take some time off and hang out at the beach! Ah! Not that this is bad in itself but the actual question is this – what is the Return on Investment (ROI)? After the beach, what is the profit? If you cannot pinpoint how your business will profit from that expense, then do not include it in your business expenditure.
Aside from your personal needs, your business is not responsible for owambe (partying), charity (unless it is CSR which is part of your business marketing strategy) and every other unnecessary expense that has no ROI.
- KNOW WHAT IS MOST IMPORTANT TO YOUR BUSINESS AND CAPITALIZE ON YOUR BUSINESS SELLING POINT
Many times, what increases business costs are various elements that your business does not even need. For example, if you run an agbo jedi (local deworm medicine) business, you may not need to focus too much on packaging like a gifting business – especially if you are just starting out. What you need is something presentable, good customer service and quick product delivery and you’re good!
If you are a small business and you focus too much on the things that do not contribute to your sales then you need to remove those things so that you can cut business costs. Focus on your selling points, make your product the best it can be and you will make sales like never before while reducing costs to the minimum.
- NEVER STOP PRICING
When it comes to buying raw materials, for example, you may get comfortable with a price that has been the same for a very long time from the same supplier. However, remember that you can always get better deals if you seek them out. Always be on the lookout for better deals and prices to help you reduce your business costs.
Have more than one supplier, independent of each other, so you can get at least two or three different price quotes then go for the one that favours your business the most.
- TAKE ADVANTAGE OF TECHNOLOGY
The thing about technology is that it may seem challenging at first but it pays off so well in the long run. For example, you don’t need to raise money to set up a physical shop these days, all you need is an Instagram business page, and targeted ads and you start making sales!
Never shy away from technology because it makes things easier for you, saves you time and can increase your profit by over 10 times if you do it right.
I am Aunty Ronke and I am here to help you on the journey to making your small business a big one! Don’t forget to follow me on Instagram @auntyronke for daily updates and tips like this and hit the subscribe button to be notified when I make a new post.