3 New Years Resolutions for Your Business
By Dallas Gulley, Business Systems Specialist & Managing Partner of Athena Services LLC

 Whether your business is doing great, poorly or somewhere in between - there are still things that can be done to help fatten the bottom line. 

With the current economic condition Businesses need to, and should, pay special attention to the side of the business that they can have the most control over and most easily influence, what it costs to make money. You may not think that you have much control.  There are costs you have little or no control over but there are ones that you probably do.  Once you take control you can begin to influence those types of business costs to help increase profit margins or free up money for use in increasing sales. 

If you can control and influence how much it costs to make money in tough times you will be in a better position when times are good.  For the New Year try these 3 “Business Resolutions” to help your business be more profitable.   Your business should be a “Lean Green Money Making Machine”.

1. Learn what it really costs to operate the business and make money.

2. Identify what is the true “Cost of doing Business” and what are the costs that can be controlled.

3. Exercise influence over the costs that can be controlled to reduce them.

Sounds simple right?  Well it can be but it will take some work and investment of time.

1. Learn what it really costs to operate the business and make money.
How do you learn what it really costs to operate the business?  First sit down and establish 2 categories. 

Category 1 is for costs that the business has to incur to stay in business and make money,i.e, Leasing space for the business; raw materials; shipping costs; employees; advertising. 

Category 2 is for costs to run the business. IE Phones; copying; accounting/payroll services;

For each category, identify what are the groups that those costs fall in to.  For example:  Lease, Janitorial, Furniture, Coffee and Security may be grouped as “Building”.  Create as many groups as necessary so that all costs can be put in to a group.  The finer detail you use to determine the groups the more control and influence you can have.

2. Identify what is the true “Cost of doing Business” and what are the costs that can be controlled.
For each group in each category you should establish a budgeted or planned amount and the actual amount for each month of the year.  In some cases the budgeted/planned amount will be easily determined such as rent or lease payments.  Others might not be so easy without going through records for the past year.  If you have the time or ability to collect them for last year all the better but if not, give your best educated guess.  By this time next year you will know what the number should be.

As the business incurs costs be sure to note it and include it in the actual amount for the corresponding month in the correct group.  Remember the more detail you record the more control you can have.

3. Exercise influence over the costs that can be controlled to reduce them.
Each month, after all the costs are recorded, total up each group and each category.  Now you can see what is your “Cost of doing Business”.  Review the groups and detailed costs in the category of what it takes to run your business.  These should be costs that you are most likely to see where savings can be made or costs reduced.  There may be some costs that are readily apparent in the category for staying in business.  In the example above the group “Building” for the category of staying in business, you may find that the coffee you supply to customers and employees could be provided by a vendor or managed by you or an employee and purchased wholesale at a reduced cost. 

Commit to diligently reviewing the actual costs versus the budgeted/planned amount.  Whether there is a difference or not these are the costs that the business is incurring.  You need to know what they are and the significance of each to staying in business and making money.  Evaluate the groups and the detail in each group to determine if it is really contributing to staying in business or making money or running the business.

While reviewing the monthly costs assess each cost to be sure it is really justified and if it is give thought to how/if it can be reduced without sacrificing making money, staying in and running the business.  But remember don’t get rid of something or stop buying things just for the sake of trying to save money.  The goal is to understand your business costs so you can have an influence but the influence that is exercised has to be weighed and given proper consideration to be sure it is in the best interest of the business. You know your business and you know what’s in the best interest of it, so knowing what are the true costs are allows you to better run your business.

Dallas Gulley - Business Systems Specialist & Managing Partner of Athena Services LLC, Dallas has worked with Fortune® 500 and Fortune® 1000 companies along with start-up businesses to automate business processes or upgrade their existing systems, to meet the demands or provide for growth in their respective industries that allow them to be more competitive and profitable. Read More.