You want to stay within budget and reach your estimated earnings, but what’s the best strategy? Well, at the end of the day, you have only two options, really: spend less money or make more money.
Within each of those strategies, of course, you have lots of options. But which one will get you to your financial goals sooner? Let’s take a look at both approaches.
Wasting money is a sin in the small-business world. We’re fighting for survival. You’ve heard the statistics: only half of the small businesses started will last five years. You want to give your small businesses every chance to be in that surviving 50 percent.
But money waste still happens. You miss the leaks. You’re too busy. You don’t have time, or so you think, to check on all the little ways you could be saving money. So you don’t. You lose money because of lack of knowledge (spending hundreds on software when we could have used a free version), misunderstanding (not clarifying terms of a vendor contract) or failure to try new or different approaches (migrating to the cloud, using VoIP instead of standard phone service).
Cutting costs involves three important steps.
1. Plugging the leaks. This first step is all about finding the ways your business is losing money. If you’re paying late fees due to disorganization, paying a higher interest rate because you didn’t shop around, or otherwise seeing money flow out with no return, you’ve got a leaking ship on your hands. Plug those leaks and you’ll sail faster and further.
2. Trimming the fat. The second step is about finding better ways, smarter ways, money-saving ways to do what you’re already doing. Review the way each department is run and ask if there is a better and cheaper way to keep things going. Ask employees for ideas and input. Offer rewards.
3. Maintaining the savings. Track the money you save; don’t let it get absorbed into operations without accountability. Review your business regularly for leaks or new ways to save money. And communicate with employees, especially with the leadership in each department.
If you’re looking for a quick way to get from red to black, you can’t beat some slashing of expenditures. But cutting costs is not a strategy that will work by itself to build a business long-term. As your business grows, your expenses will grow, too. If you care only about cutting costs, you’ll resist spending when you most need it to support a growing business. For that, you’ll need to implement your next strategy: boosting sales.
Boosting sales is much more than a money-making strategy. It’s basic business growth. If you’re not selling and regularly increasing the amount of those sales, then something is fundamentally wrong. A business has to grow. Otherwise it will stagnate and become the wrong kind of statistic. When you as a small-business owner are focused on boosting sales, you are focused on building a business that will survive and keep expanding into the future.
Boosting sales can be done in three primary ways. These three methods can be done simultaneously or consecutively, or you can focus on one for a while, switch back to another, and so on.
1. Getting new customers to buy. Getting new customers requires a whole range of business activities, from marketing to following up on new leads to funneling those leads to a sale that is satisfactory for everyone involved. You might focus on a multi-media, multi-dollar sales campaign or on building a small-business blog; both are viable ways to attract new leads and then convince some of those leads to become new customers.
2. Selling more on each sale. Here you’re looking at simply getting the customers who do purchase to purchase more. Value-added sales, offering product and services packages, and expanding your offerings to include related products can amp up your profit on each sale.
3. Getting repeat sales. Customer loyalty is built mostly by being a business that your customers can trust. You offer real value, you charge a fair price, and you listen to your customers. You can increase customer loyalty by offering customer rewards and loyalty points, subscription offers and by staying in touch with special offers for returning customers.
Boosting sales has to be a long-term strategy. You don’t want “empty sales,” which are the result of an overblown, expensive, crash-marketing campaign that brings in a sudden rush and then flatlines to nothing. Boosting sales works best as a slow build, something you do over time. Marketing—even the best—takes time. That’s why it’s called building a brand, not flash-burning one onto your would-be customers’ psyches.
Source: 6/6/12 American Express Open Writer Annie Mueller