Many times when we are in business there comes a time when we start to look at ways that we can save money. Most of us begin by looking at our expenses. It’s ok to start looking there but a lot of times our income could be the culprit. When we go into business we want to cover almost every aspect of our industry for fear of losing out on business. But that train of thought can sometimes cause more harm than good. You could have a product or service that is sucking the life out of your business.
I’ll use my business for example. When I first started my company I was doing bookkeeping and individual tax preparation. I was looking at my services to see if it made sense to continue doing both and only 10% of my revenue was coming from tax preparation. The service was pretty much taking care of itself, however, the conveniences that I maintained for my clients was cutting into the revenue from my bookkeeping service. Another thing that I considered was the time it was taking to prepare tax returns. I was charging flat rates so the time I was spending on doing that wasn’t necessarily allowing me to get paid for it. I also cut that service because it was causing conflict with my bookkeeping clients. I want to make sure that I am available for my clients when they need me and they had deadlines to meet. If I have to stop what I’m doing during a “season” every year to prepare taxes, my client’s whom I help all year long end up having to be on hold. So, for me it made financial sense to cut taxes from my practice. In the end, my revenue the following year rose twice as much as it had in comparison to the previous 2 years that I offered tax preparation service.
Another example could be ABC Printing. ABC Printing does all of their printing in-house. They noticed that a lot of people are wanting to wrap their cars so they decide to start offering that service so that they don’t have to send people away from their company. They don’t do this in-house, they’ve decided to outsource the work. With outsourcing, they markup the price that they are given so that they can still make a profit on it, but they still have to stay competitive with the market so they don’t want to markup the price TOO much. At the beginning, business is going great. They’ve just announced it so they are getting great business with this new service. A year or 2 later and it’s not quite booming like it was. They are still getting their markup with it, but not nearly as much as they were. It’s time to cut cost. Even though they were outsourcing this service, it still required labor on the front end as far as billing, designing, and whatever else is associated on the administrative side. So now, they are ready to look at the budget and make some cuts. At this point, it only makes sense to cut the car wrapping and sending customers on to the other companies. It will still maintain their professionalism, but it won’t drain their main money making duties that they do.
These are just a couple of examples so that you can see how looking at the income could be a great start in cutting costs. Every business has strengths and weaknesses. We can focus on our strengths and allow that to be the bulk of our business and strive to perfect the strength of it and know when it’s time to let go of the “weakest link” in our business. Focused business usually helps you hone in on your practice and perfect a specific skill and increase the quality of service for your clients.