Expand Your Profit Margins Through Better Expense Management

My son, Dave, is on a frugality mission. He has challenged himself to live on the income that a person at the official poverty level would have. It’s not that he has to. He just has bigger dreams about what that can do for him as a person and in the future he envisions for himself.

That’s what you as a business owner are most certainly doing. Forgoing instant gratification (like sleep, holidays, a steady pay cheque and benefits) for the sake of your vision.

So here are some tips on how to squeeze out some extraneous expenses, to be invested in a better ROI now and in the future. In other words – spend less, and make more profit.

Negotiate Your Best Deal with your suppliers. Whether it’s a down market or an up market, this is a good habit to practice at least annually. Start with regular monthly expenses: phone, internet, utilities, credit line interest rates, mortgage rates, rent. Then work with your other frequent suppliers. Not to beat them down in price unnecessarily, but to see where you could streamline things to get more value for your money and they get more value for their time and ingenuity. There’s a lot of competition out there for your business, so shop around. Supplier loyalty does not mean throwing money down the drain. It’s a two-way street called Value Exchange.

Maintain an Excellent Credit Rating. Leave room on your line of credit so you aren’t always maxing your credit availability. That adds points to your credit score. Pay your credit cards in full monthly. Set aside financial reserves, even if it’s only tucking away a few hundred or thousand a month in a separate account. Then when you need financing for expansion, you are in a great negotiating position.

Pause Before Picking Up the Tab All the Time. The temptation is strong (and the ego is, too) when it comes to eating out, to put your credit card on the table first. Especially the gold card, or the platinum one, with your name on it. It’s a sign of success. Right? Learn to add value in ways other than being the big spender.

Hold On to Your Best Employees but do negotiate hours if necessary. There’s no better way to capitalize on a down-turn in the market than to provide the best service you can for your clients. Reward your employees when times are booming.

Stick With It. No matter what may cause a temporary decline in business, when you keep adding value for your clients, they will come back. Meanwhile, momentum matters.