Profit-ic! How to reduce operating costs and increase profit?

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What are operating costs? Chron describes them as involving “any expenses related to running your business, such as labor and office costs.” Meanwhile, Investopedia defines profit as “the money a business makes after accounting for all expenses.”


Therefore, reining in operating costs while boosting profit would undoubtedly be a winning formula – but how can you achieve it? Here are a few steps you can take to help sidestep the false economy of slashing running costs in a manner that would compromise the customer experience.

Optimize your existing employees’ performance.

When employees currently on your payroll perform below par, it would run up higher labor costs, as you would need to recruit more workers or submit projects later than you had originally expected.

As any increase in labor costs would hit your profit margins, you should endeavor to get the most out of your employee base before you consider adding to it. So, make sure you train your workers thoroughly, consistently assess their performance and, perhaps, offer them motivational rewards.

Try to get the best deal from suppliers.

You can do this by attempting to negotiate terms with your current suppliers – or, if this strategy fails to bear fruit, look for new suppliers.

The website warns that the costs of materials can be either fixed or variable depending on your company’s circumstances. Hence, you could have a particularly strong incentive to tackle these costs – and buying materials on a ‘just in time’ basis is one potential way to do so.

Be careful not to order more materials than you need.

This advice is more relevant for businesses – such as those in the food industry – that regularly use or sell raw materials. Wasting these materials would result in operational expenses skyrocketing and profit margins plummeting.

Fortunately, though, there’s a reliable way you can avoid inadvertently ordering surplus materials for a given day: take account of what same-day sales you amassed the previous year and, from this data, estimate what – and how many – raw materials you would need to order next.

See if you are making the best possible use of your premises.

If your current workplace is larger than what your own business has a use for, you may be able to sublet unused space in the building and consequently generate an additional stream of income.

Alternatively, you could move into a whole new office altogether. Through, booking a serviced office from BE Offices, for example, your business could get free telephone calls as part of an all-inclusive office package the overall cost of which covers rent, rates, and utilities.

Look into the possibility of cutting production costs.

Reducing both waste and the cost of materials – two areas of cost-saving this article has already touched upon – can provide reliable means of slashing a company’s production expenditure.

However, you might also be able to streamline production processes or reduce working hours in order to even further lower costs. Basically, go through your company’s production routines with a fine comb to see where financial savings might be possible.

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