Operating costs and revenues

Trying to reduce your operating costs can be tricky business. Almost every company has areas where costs can be cut, but you need to be careful that restricting the budget doesn’t have a major impact on your revenue.

Pareto Principle

This concept is based on the idea that 20% of a sub-set usually delivers 80% of the results. Surprisingly, this has been found to be incredibly consistent across different fields of research, particularly business. Most businesses see this trend in 20% of their customers driving 80% of their profit, 20% of their marketing efforts delivering 80% of the results, etc.

Consider this distribution when evaluating your budget, allocating more spend for the most successful parts of your business. It might also be helpful when evaluating your clients. If you have a handful of clients depleting most of your resources but not delivering profit, it is probably time to let them go and focus on your better clients.

Paperless

Paper and ink cost money, but can be pretty easily cut from most offices. Electronically storing your documents in a cloud-based environment also allows them to be more accessible when out of the office and protected in case of disaster.

Office space re-evaluation

Having too much office can be a huge waste of money, but size isn’t everything. Location can be very important for many businesses, but most internet companies receive very little value from where they set up shop and can reduce operational costs by moving.

Buy for function

Nice, new office furniture is great and can have an impact on employee morale, but it really isn’t driving revenue, and most employees would rather work for a successful company that is thrifty than a struggling company that tries to look like a successful company.

Used office furniture is just one option. Refurbished computers and printers can save a lot as well without impacting performance.

Find versatility in your staff

The demands we place on our employees are seldom consistently distributed throughout the year. Having employees capable of filling many roles makes your business more agile and adaptable to the changing business needs, eliminating costs of seasonal hiring or contracting out work.

Minimalist attitude

Many mountaineers adhere to the notion that if you pack for every possible emergency, you’ll surely need to have done so. This is because with every bit of gear you carry, you slow and tire yourself, making it more likely you will be caught in an emergency situation. In this same way, purchasing an assortment of equipment, tools, and services without careful consideration of its need, will lead you to have wasted resources that can be spent on what is truly valuable.

Simply, buy or lease based on need, and stay as flexible as possible. Always consider how you quickly you can get out from under expenses, and negotiate these terms before signing the contract.