It’s no secret that times have been tough for the economy over the past year, but with the downfall of many big corporation and organizations, small businesses everywhere are seeing potential for 2010 like they’ve never had before. Small business owners must be ready for these potential increases in business, and having a good understanding of their fixed and variable expenses is a critical part of this.
One expense that has increased for many small businesses is debt service, as the bank panic of 2009 caused many revolving debt facilities to be amortized. And the small business owner can only cut other expenses, like staffing and advertising so far without a negative impact on the company’s sales and lead generation. Because of these challenges, the small business owner should always be on the lookout for creative ways to keep their other expenses low.
Pool Resources Where You Can
Many business owners are working with non-competitive business associates in a collaborative method in order to cut expenses. For instance, two or three business owners may agree to share office space and other overhead such as equipment rather than each be responsible for the entire expense.
Others have created co-op marketing campaigns and shared the expense.
Strategically combining resources is a great way to immediately improve what could otherwise be costly fixed expenses, an almost instant improvement to the small business owner’s bottom line. Another added bonus is that sales often increase due to referrals that you wouldn’t have otherwise received.
Replace Expensive Staff Overhead Where You Can
Many small businesses are opting away from traditional sales force and production staff and choosing to use non-traditional strategies for meeting their staffing needs. Can you replace your permanent staff with contractors, temporary or part-time workers who only need to be paid when there is work to be done? By creating variable rather than fixed expenses, you would be able to substantially reduce overhead and cause an immediate improvement to your bottom line.
Many small business owners feel that sales employees are a necessary fixed expense, but there are even some solutions for keeping this expense in check. Why not consider putting your customers and business associates to work referring you business by offering a referral fee each time a lead they send you becomes a sale? By using this strategy, you only have to pay your sales staff when you actually get a sale. Cool!
Rebid Necessary Expenses
There will always be expenses you just can’t get away from, such as insurance, telephone, and credit card processing charges. But it is important to be on the look out for better deals, as the economy is keeping many of these areas very competitive, which can be to your advantage. Get new bids on these expenses frequently and your total expenses will decrease. Even previously challenging expense categories, such as contract labor can now be renegotiated, because layoffs and dull economic conditions are creating a pool of more capable resources to choose from.
If you are able to adjust and change quickly, you could be very successful in your small business this year. Studying your expenses and adjusting where it is possible is a terrific way to further improve that success.
To get more small business success strategies, and to claim your free white paper: “7 Ways Your Stone-Age Accounting System is Stealing Money From You Every Day … And, How to Get it Back This Year” visit www.WebAccountingOnline.com.
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