Defining profit is easy: Profit = Revenue - Expenses
The daily demands of your sign making business often leave us so busy that many of us are guilty of not keeping better track of our revenue and expenses.
The truth of the matter is this: Profit = Revenue - Expenses Tell me, how do you expect to make a profit if you aren't keeping track of your revenue and expenses? Blind hope that the numbers will fall into place? Sadly, that just won't work. What you need to do is make sure that every expense your business incurs has a matching source of revenue. Take a look at these expenses and see where you might be able to reduce costs and increase profits:
- Cost of Sale (or Cost of Goods Sold) Can you reduce the cost of production at all? Do you have the ability to put out a product that is high enough quality to satisfy your customer's, but more cost effective than the products you are creating now?
- Marketing and Sales. What methods do you use? Are they drawing in clients? What is the cost of marketing? Figure out the return you are getting for the amount you are paying and figure out if you can cut corners here.
- Rent and Utilities. Rent usually accounts for about 10% of the revenue of the company, when it is in a major city. Adding 10% to your bottom line can do wonders for your business. Is there a way you can reduce rent costs, such as moving your business into your home or a different location?
- Staff. Who is bringing in the money? Who is dead weight? Is there a way to divide one employee's responsibilities among the others and let that person go?
- Health Insurance. What HMO options are there available for your employees? Share the cost of health insurance with them.
- Additional insurance. Small companies might be able to afford cutting some liability insurance or other additional insurances to increase profits.
- Office Supplies. While you want to make sure that the office is fully stocked, the truth of the matter is people tend to use as much as there is available to them. Set a limit on the number of pads of paper, pens, pencils and staplers you will purchase and stick to it.
- Phone and Internet. Are you sticking within the minutes on your plan? Way over, way under? Adjust accordingly to avoid extra expenses. Save minutes, use Skype!
- Cut travel costs. Use conference calls and Skype to avoid unnecessary travel. when you must meet face to face use frequent flier miles when possible and combine trips to visit multiple cities in one visit.
- Other. Ahh, the dreaded Other category of expenses. Examine what you are really using, and what you can live without. You'd be surprised how well you, and your business bank account, can get along with less.
