Small businesses are forever being squeezed harder due to escalating costs. The insurance premium takes a hike, fuel prices go up, your wholesaler of choice has put up its prices, the list goes on. Given that cash flow is one of the biggest risks to a small business, particularly in its early days, cost control needs to be high on the priority list to ensure survival.A successful business runs lean, but more than that, it treats cost control as an ongoing process of continuous improvement. Here are some of the areas you need to closely monitor to stay ahead of the curve.
Inventory costsEvery business needs a certain amount of inventory, but for those in the manufacturing sector, the costs associated with stock can be significant in terms of storage costs and the potential for wastage. Inventory can also tie up much-needed cash. Running too lean, on the other hand, can stifle growth and lead to delays and bottlenecks. By investing in small business inventory management software, an organisation places itself in the best possible position to walk this tightrope of having just the right amount of inventory, but no more, at any given time.
Staffing costsSpeaking of tightropes, getting the staffing equation right is another task that can present a major challenge. Depending on the sector, payroll can constitute anything from 15 to 50 percent of a business’s costs, so clearly this is an area that bears close examination. If your company is subject to peaks and troughs or seasonal variations, the challenge becomes even harder. Look to use freelancers or contractors wherever possible, and evaluate the possibility of outsourcing non-core support tasks such as bookkeeping, IT support and the like.
Vehicle costsAgain, the impact of vehicle costs depends on the sector in which you operate. If you have a fleet of vans or trucks, it could be astronomical, but even if you just have a handful of company cars for managers, there are still savings to be made. The first is in the way you acquire the vehicles in the first place. Most businesses favour lease deals over outright purchase. Costs are set in stone, particularly if service and maintenance is part of the deal. In Europe, businesses are taking advantage of tax incentives to go electric, and the Australian government is under growing pressure to introduce similar initiatives. This is something to watch closely over the coming months.
Marketing costsThe typical business spends around five percent of revenue on advertising. This can be significantly higher in the service sectors. In this digital age, getting the optimum bang per buck out of your marketing effort demands constant monitoring and refinement. If you are adopting a PPC strategy, keep on top of it every week, seeing which keywords are really generating traffic and, just as importantly, which are not. Also make sure you pay attention to social media marketing. There is no better way to engage with millions of potential customers at negligible cost.