Most small business owners aren’t in it to get rich quick, but the fact of the matter is you need money in order to make money. And sometimes (most of the time), small profit margins aren’t going to cut it when you’re trying to keep inventory on the shelves, employees paid, and operations up and running.
If this situation sounds familiar, it’s time to optimize your strategy in order to improve your profit margins and make the most out of your small business earnings. In this article, we’re breaking down 4 ways you can increase efficiency, cut costs, and crunch numbers. Of course, every small business is different so you’ll have to consider your own needs and unique structure to find a strategy that works for you. Use the following tips as a general guide.
1) Get a sense of your financial standing
Before you can identify where you can improve, you’ll have to take a look at your current financial standing. Using a business calculator, you can calculate your cash flow and find many other important financial figures that can help your business grow.
But if you’re not totally confident in your number-crunching skills, you might consider hiring a local business accountant to help you make sense of the mathematics. Making sure these numbers are accurate from the get-go can make a huge difference when you’re analyzing your business’ financial successes and shortcomings.
2) Revamp your hiring strategy
For most small businesses, employees are the brunt of business costs—from hourly wages to office supplies to taxes and insurance, a lot of your potential take-home earnings goes out the window when you add to your staff.
Here are a few ways to reduce your labor costs:
Limit employee turnover: Each time you hire a new person to your team, another more seasoned employee has to take time out of their day to train the new team member, which can take a toll on your business’ productivity. Rather than continuously hiring people that will only be short term, be more diligent in the interview process to make sure that the candidate would make a good investment. In addition, you should consider hiring in groups so that everyone can be onboarded at once rather than one at a time.
Cross-train your staff: When an employee decides to terminate their employment, it’s a hit to your company in more ways than one. But if you make it a point to cross-train your staff, it’ll surely soften the blow. This way, if you lose a key staff member your other employees can help pick up the slack until you have a good fit to take over. Or, you might be able to hire a replacement internally so they’re already trained and ready to go right away!
Think twice about hiring: It can be challenging to find a qualified candidate to hire for your business, but the right one could be worth the wait. Finding someone who is well versed in processes and knowledgeable about their industry will be easier to train and less likely to leave shortly after hiring, which could ultimately save you training time and money—and even increase productivity.
3) Cut excess costs
From inventory to rent and utilities, there’s a lot of costs to cover when you open your own business. But if you take a closer look at your expenses you’re more than likely to find ways to reduce them. Investing in smart appliances is one way to optimize your energy use so that you’re not spending so much of your revenue on just keeping your doors open.
If you want to take your operational savings to the next level, consider going remote. This may be a little harder to do for businesses such as brick and mortar stores, but digital marketing agencies and software companies can easily transition to this business model to save on rent, utilities, and office supply expenses.
4) See where you can expand
Finally, if you want to see your profit margins grow, you might need to take a look at where your business structure can improve or expand. Use what you know about your customer to find out how else you can service them and address their needs. If you run a gas station for example, consider adding an on-site car wash to bolster your services.
Use these tips to help you improve your profit margins and watch your business grow.