The goal for any business is to realize sustainability in the way of profits. It’s normal that many entrepreneurs see increasing revenues as the only way to record greater profit. Have you considered reducing cost in business as a path to increased profits?
Reducing cost in business only makes headlines when a rough patch is hit. It is then that many managers and entrepreneurs realize that their business was highly inefficient or wasteful. But you and I know that managing costs when times are bad, as a reactive measure, only makes the managers and entrepreneurs villains to the employees in the business. If you do it this way, you’re only increasing gloom in a gloomy atmosphere.
What if you worked to make your business more efficient during the good times and take the risk to increase revenues during the down times? After all, many businesses fall into the trap of growing too much and too fast when they have monies on their hands.
Managing costs in a proactive manner shows that you can carry the good financial management from your personal life and onto your business. The discipline to deny yourself and spend money wisely cannot be substituted. I don’t really need to remind you that every shilling you spend in your startup should be directed at improving productivity.
Heck, even CSR is used by big businesses to shape your opinion of them. If they wanted to take social responsibility they would simply pay their employees more. But let’s not get into this.
Profit by reducing cost
More important is that reducing cost in business will certainly increase the profit you record at the end of the year. It’s why many businesses are scrambling for varying cost cutting measures besides supplier discount. Businesses in Kenya are surrendering logistics, accounting and a host of other back office functions to specialist businesses. Look at how banks gave agents the responsibility to widen their reach.
One of the reasons why this is happening is that reducing expenses is very much under a business’ control. If you decide to expand to a new market you’re not only hoping that things work out in your favor but also that they remain so for the foreseeable future. Compare that to identifying a specific cost and knowing with certainty that you will be saving this number of shillings.
Even so, reducing expenses does not give you an excuse to be filthy cheap. You may end up in a worse position than where you started.
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