Last week, we discussed setting up your Profit First bank accounts. This week, I want to discuss that infamous line item- Operating Expenses.
We hate them. They keep us up a night. They can become like a runaway train. Before Profit First, you wouldn’t really know whether your expenses were too high for your size business. But most business owners have a gut feeling about Operating Expenses, and it usually isn’t pleasant. I doubt I need to do much to convince you that your operating expenses are probably too high!
So now that we’ve just put that out there, let’s say it again:
Think back to when you first went into business. You were creative! You found a way to eek out every dime. You made do with what you had, and things worked just fine. Then, as your revenue started to grow, you added on more expenses: Maybe more staff. A larger facility. Nicer furniture. Better software. And more software. Fast forward to now, and you may feel like your operating expenses are either:
A. Too high.
Want to know my ah-ha moment about expenses?
Branded water bottles. Yes. Those nifty bottles of purified water that had my logo, contact info and value proposition on them. We originally placed an order for a case of them for a function we were sponsoring (where we later discovered water was already provided). Then, we started buying them for clients who came to our office to meet, because store-bought bottles of water are just so… Ew! Then, we kept on buying them since we wanted to keep our “bulk” rate that we had signed up for. As you can see, this bottled water thing turned into an expense that was completely unnecessary. When we took a step back and priced regular water bottles, whoa! They were a third of the cost of the fancy branded water!
So, what’s your “branded water”? Here are a few ideas we’ve seen:
- Office space you don’t need? (Maybe you don’t need the fancy office and can scale back a bit.)
- A crazy amount of snacks you buy for the break room? (Have people bring their own and save yourself some cheese.)
- Software you are charged for each month but never use? (Get creative with software usage and see which apps you can combine to eliminate some costs.)
- Vendors that charge too much? (Shop around!)
I encourage you to assess ALL your automatic payments and whether or not you truly need those purchases. I’ll bet you find a few that you don’t need! I want to propose to you than you should get creative again and whittle down your operating expenses. Once you have pinpointed those expenses that are unnecessary, cut the cord! (And please comment below to let me know what items you cut.)