4 items of business expenses that can and should be reduced

Over the past year, the Unified Register of Small and Medium Enterprises of 16 thousand small businesses was closed. Entrepreneurs are pessimistic: the purchasing power of Russians is falling. As the survey showed, a quarter of Russians saved money due to the refusal to travel by Ipsos Comcon, at the end of last year, every fifth inhabitant of our country began to save on trips to cafes and restaurants.

What should the owners of shops, coffee shops and beauty salons do in this situation? Optimize costs.

What does it mean to cut costs

Before you start cutting costs, you need to be clear about what we mean by that.

Expenses are not just monetary costs. These are any resources that you and your employees spend on solving work problems (first of all, time).

To cut back in our case means not only to cut costs. Resources can be redirected - this can also help you earn more.

Before you jump into battle, make a list of your monthly expenses. It is important to proceed in this order:

Make a list of costs.
Enter data on expenses for one month.
Then enter data for as long as possible to see the costs in dynamics.

If you ignore this order and start writing all the numbers at once, you can fall into a cognitive trap. Seeing the growing amount of expenses, you will subconsciously strive to reduce it and may omit some items of expenses. The main purpose of the table is to see the whole picture.

It is not enough to know the indicators for one month. Costs often change depending on the season. For example, for a restaurant, buying vegetables in winter will cost an order of magnitude more than in summer. If you do not account for this difference and do not raise prices, you run the risk of incurring losses.

When the table is complete, compare the indicators with each other. If they differ greatly from each other from month to month, or some are several orders of magnitude larger than others, this is a reason to pay attention to them. These are the areas where cost savings are likely to benefit you.

The next step is to cut costs. There are four main cost groups: rent, purchasing, salaries, and marketing. How do you optimize each of them?

How to save resources

1. Rent: bargain or move

In most cases, the cost of the site is the most significant, especially if you are paying for rent. Then there are three ways to cut costs:

try to negotiate a reduction in the rental price with the landlord;
sublease part of the area - but you need to take into account the difficulties associated with legal and accounting support of the process, and the emergence of new risks (you actually lease your legal address);
move to less expensive premises.

However, it is important to remember that exactly the location of the point can be your competitive advantage. Then moving to less expensive premises can go sideways. Think twice if it is worth saving on rent if:

your outlet is located next to the metro;
cafe - next to the business center;
beauty salon - in a new residential complex, where there are no competitors;
point of minor household repairs - in a shopping mall at a checkpoint.

2. Purchasing: take what is in demand

Do not keep inventory on your knees. As practice shows, memory sometimes fails, and notebooks with last year's notes are lost. There are several ways to reduce procurement costs:

Refuse to purchase low-margin goods, that is, those on which you earn little.
Reduce your assortment and focus only on what sells best.
Specify in the contract with the supplier the possibility of returning unsold goods. It should be borne in mind that in such cases, suppliers have requirements for expiration dates. For example, cosmetics unsold in beauty salons can be returned no later than six months before the end of the product's shelf life.
To sell off an illiquid product, that is, one that could not be sold quickly at the market price, at a stock. You won't be able to make money on this sale, but you will free up money and can use it to grow your business.

The main thing is to know how much money is frozen in the warehouse and track the illiquid item. Your task is to make sure that the warehouse turns around as soon as possible, then you will always have money for purchases and operating expenses.

3. Salaries: pay for results

Feel free to pay good salaries to achieve your goals. You don't always need to lay off or lay off workers to keep costs down.

Find out which employees are the most effective. Compare their success in three dimensions: number of sales, revenue, margin of the goods or services they sell.

Watch the best, or just ask what motivates them and helps them achieve such results. Carry over their example to the rest of the staff. Complement the incentive system with a new payment scheme: for example, let employees receive a percentage of revenue or bonuses for the sale of high-margin products.

4. Marketing: retain old customers

To properly allocate marketing costs, ideally you should understand:

how much does it cost to attract a new client;
how many new customers have come to you in a certain period;
how many clients come back to you again;
average check in your cafe, beauty salon or store;
how much the client spent in total.

You can tell offhand whether customers come back to you. But if you do not know the answers to the questions above, then you will not be able to calculate the profit per client in money.

Estimate the value of new and old customers. If you are spending more than you earn on acquiring new customers, you need to reallocate marketing spending and focus on retaining old customers.

For example, word of mouth is a powerful marketing tool. In order for customers to recommend you to family and friends, first of all, you need to establish a service, otherwise you will pour water into a leaky bucket.

Collect feedback: customers will tell you what needs to be fixed in order to earn their loyalty.

Some entrepreneurs believe that attracting as many new customers as possible is a winning strategy. But it becomes unprofitable if you do not know how to retain the client and earn on him for a long time.

How to understand that everything is fine now

Let's say you curtailed an advertising campaign in the local media, replaced part of the fixed salary of waiters with a percentage of sales, and reduced your assortment. How to understand that you did everything right, and did not commit business hara-kiri?

Create a table of expenses and income on one page. It's simple: revenue should grow, and expenses should decrease, or at least remain at the same level.

The main metrics that you should watch for in order to keep your finger on the pulse are revenue, average check, number of purchases, and customer return.