Though you need to invest in your business to fuel growth to some degree, you’ll generally uncover the path to profitability quicker by lowering your business costs. Here are four ways to do it.
1. Test your ideas before you invest in them fully
Given that financing and business loans are so hard to come by for many small businesses, it’s no surprise that “The Lean Startup” by Eric Reis (which began as a book but launched into a full blown movement) has generated such entrepreneurial enthusiasm. Though there are many different aspects to the Lean Start Up theory, it includes common sense ideas that you can apply to any small business—that can start to slash your business costs now. For starters, test your product and service ideas before you invest fully in them, or put your business at risk by makng change you didn’t solicit customer feedback about. By putting your ideas in front of a customer focus group, which can be done informally, in person, or online, the idea is to test and learn about what your customers want—long before you bring a product or service to market. Even if your ideas get a big “thumbs down,” little failures early on provide the necessary knowledge to make course corrections before they are too costly.
2. Prioritize the skills you pay for
Time is money when you are running a small business, and while you can’t expect to expertly handle every aspect of business on your own, you’ll save loads of energy, time and money, by recognizing what you do well, and what is worth spending money for someone else to handle. To that end, evaluate the tasks that require an actual human against those that might be made quite do-able with the help of technology. For example, you may need to work with an accountant to handle your quarterly tax payments, tax strategy, and returns, but a simple web-based accounting system like Wave or QuickBooks might be a more cost-effective way to manage your basic monthly bookkeeping duties. If you love building relationships, for example, but know nothing about online commerce and web analytics, invest in a freelance web designer who can give you exactly the site you want—but take advantage of technology that makes user data easy to understand. For example, CrazyEgg starts at as low as $9 a month, and can show you where people click on your site. With that data, you’ll have actionable information you need to relay back to your designer, at a fraction of the cost you’d pay an online marketing consultant.
3. Minimize hard copy costs
If you’re hesitant to ditch your paper trail because you deal with contracts that require signatures and hard copies, you can streamline processes (and cut the costs of paper, printing and postage) by taking advantage of mobile technology. For example, SignEasy, an app, available on both Apple and Android platforms, allows users to sign download, sign, save and return contracts and other paperwork sent by email, or from other cloud-based sharing apps like Evernote, Box, Dropbox, and Google Drive (formerly Google Docs). Try the basic app for free, or $19.99 for a year of unlimited use. If you tend to mark up package or product design documents and transfer them by mail, Skitch is a free app that helps you mark up your screen captures and images with shapes and comments, and transmit them to another person by email.
4. Ensure your products and policies are clear
Returns and chargebacks eat into your bottom line—and cost you money. According to payment processing firm e-onlinedata, a customer who disputes a charge with Visa or MasterCard can cost a small business at least $25 per event. Interestingly, all of the primary reasons such disputes arise (customers don’t recognize the merchant name on a credit card statement, expectations weren’t met, or the refund policy was unclear), are easily prevented. Review your product and service descriptions in your marketing materials and website and ensure you’ve done your due diligence: Are product functions, features, materials, colors and services named, described and depicted accurately? Do you clearly state the process for returns, exchanges, and price adjustments at checkout-- before the customer completes the purchase? Lastly, is the name you’ve registered with your credit card processor congruent with your business name? If it’s not, add language on the checkout page so the customer knows how the purchase will be reflected on the credit card statement.