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January 2013

Five Places to Find More Profits

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It’s always a good idea to be on the lookout for ways to increase your profits, and luckily, there are many ways to do that.  One way is to focus on cost-cutting, and here are five places that are good to periodically review for cost-cutting possibilities.

Telephone

Re-negotiating with the phone company every one to two years is a really good idea.  Many telecommunications companies will often bargain with you or offer you a new deal just for checking in with them.

Has your business changed?  Do you need all those extra features you are paying for?  Could you do without those extra lines?  Would another phone plan save you money on long distance or international calls?

The risk is low:  one quick call will let you know if you can save money in this area.  It’s worth it to give it a shot, and while you’re at it, you can call your smartphone provider too.

Travel

Travel is always a great area to look into for possible ways to save.  Are all trips necessary and profitable?  Are there any meetings that can be done virtually instead of face-to-face?  Virtual tools such as GoToMeeting can make travel unnecessary.

What trips can be cut this year?  Can the number of people sent per trip be cut?  Can travel arrangements be made early to save money?  Are booking dates flexible so you can compare and find the lowest rates?  Is a taxi or rent car cheaper?

Dues and Subscriptions

Paying our annual dues for the club or association we’ve belonged to forever may be a habit, but is it beneficial for your business?  We might enjoying seeing everyone once or twice a year at the meeting, but we may not necessarily have to have a membership to do that.  Sometimes paying the guest rate is more affordable than the member rate if we are attending infrequently enough.

Review a list of organizations and publications you and your employees are part of, and choose which ones you are truly benefiting from.   If being an officer in one of your organizations is not getting you any new business, then you may eliminate a time drain by bowing out and letting someone else volunteer.

Labor

As your business grows, it can be a challenge to decide who to hire next.  The first place to look before you decide should be your existing employees.  What tasks are they doing that you are paying them too much for?  For example, do you have a manager doing clerical work?  If so, you may be able to piece together an administrative job that frees your current staff from all the clerical work they are doing.

It’s worth a look to see where your current employees are being overpaid and find someone to do those parts of the job.  You’ll save labor costs and come out ahead in the long run.

Fixed Assets and Equipment

Another place to save money that can be significant is purchases of large items such as furniture, automobiles, and production equipment.  It’s a good idea to get three bids from reputable vendors so you have a choice.  Going with the lowest bid is not always a good move; going for the highest quality is.

Look in these five places, and let us know how much you find to increase your profits.  As always, if we can help, let us know.

The Entrepreneur’s Paycheck

As business owners, we may be so busy making sure the bills get paid and the product gets out the door that we may not be quite as proactive about our own compensation.  To pay themselves, many new business owners take what’s left after employees and vendors have been paid, and that ends up being their paycheck.

I’d like to propose a whole new way:  entrepreneurs should be paid three times, once for what they do, second for the risk they take, and third for the going concern they’ve built.  If you’re not getting paid three times, here’s how it can work.

First: Your Services

Just like the employees and contractors we work with, we should get paid for the actual work we perform in our business.  Most of us wear many hats in our business, and we should get paid for all those hats!

As your business grows, the tasks you initially performed will be delegated to employees.  They would never go without a paycheck, and you shoudn’t either.

The amount you pay yourself should be similar to the market rate you would have to pay someone if you hired someone else to do the jobs you are doing.  As your company grows, you will be going up the management ladder and your salary should increase accordingly.

Here’s an aha for some new business owners just starting out:  If you have cash flow problems paying yourself or others, then you might have one of two problems:  The goods and services you sell may not be priced correctly, or the number of clients you have may need to increase so that you reach an acceptable volume in your business.

Second: Your Risk

After you’ve paid yourself for the jobs you are doing in your own company, there should be something left over: profit.  As a business owner, you have earned that profit; it’s your reward for taking the risks that go with business ownership.

If there’s no profit left over, then there could be a number of problems.  This is where accounting professionals can help you review the revenues and expenses in your business and see where things are not adding up.

So far, your paycheck and your profits get you paid twice as an entrepreneur, and that’s the way it should be.  But there’s also a third way.

Third: Your Going Concern

A third way to get paid is when you sell your business.  There are many things you can do throughout the years to boost your business valuation, and the more you can do that, the higher the proceeds will be from your business.

Financial Success

One of the factors that can increase all three forms of compensation is your financial skillset.   Building your financial skills by working with accounting professionals can help you price your goods and services accurately, improve your cash flow, hire employees at the right pay rates, and implement many more financial success factors in your business.

When you’re ready to review your entrepreneur’s paycheck, feel free to call on us for expert financial assistance.