50 Ideas To Reduce Costs And Build Profits

Introduction to 50 Ideas to Reduce Costs and Build Profits

“Do you want to know 50 great profit building ideas that you can place to immediate use in your business to increase profits and reduce costs?”

 

If YES read all these ideas that have been implemented by clients and have benefited them giving their businesses dramatic boost in profitability. Most ideas can be place to action immediately. Each intent has the potential to give you many %points increase in net profits.

 

Research shows profits increase by 4%-56% and costs reduce by 18%-37% within 2 years using the easy 5 step process called the Profit Maps Model. Usually a 5% reduction in cost is sufficient to turnaround most loss making businesses.

 

Businesses can compute the value of the savings by these 2 easy formulas

 

If the business made a loss

Total Costs and Expenses = income + absolute value of net loss +/- income tax = state X

Minimum Savings you will make in 2 years = 5% of X (which was calculated above)

               

If the business made a profit

Total Costs and Expenses = income + net profit +/- income tax = state Y

Minimum Savings you will make in 2 years = 5% of Y (which was calculated above)

 

So how much can you save? Improve your profits by?

 

 

Revenue

This category typically contains inflows of resources into the business generated through operations.

Needless to state the profit building process can be used to generate marketing and income ideas. The following ideas were generated with the neutral of increasing revenue with tiny or no impact on the cost structure.

 

Revenue Increasing Ideas

If your company has facilities located over a multi-geographical area you might be able to rent antenna space to cellular phone companies. Typically these companies will pay for the use of rooftops as a place to erect their antennas. Another option is for billboards as advertising if you occupy a central location with a high visibility building. This enhances your revenue without any additional cost you. The point here is to explore substitute uses for your facilities. Remember they are assets that can be used 24 hours a day, seven days a week. There are numerous opportunities acquirable for increased revenue if you look for them. Training room and function room facilities can be rented out in the evening or weekends. How about spare land or excess slots you own for public automobile parking?

 

Determine whether your business can market commission and non-commissioned products as add-on sales. Look for opportunities to sell products to your existing customer base at no additional cost. Examples are catalogue income to airline passengers and the understanding of miscellaneous products to credit card customers. You might have the opportunity to do something similar. Your customers have more value than you realise.
Is there any additional value in your customer database? Perhaps your business could generate additional revenue by selling the data. Alternatively think about starting a telemarketing department to market another line of products or services. Depending on your business and the nature of your customer base you might have something great here.

 

Explore the advantages of an effective e-strategy including e-commerce, e-business, e- people and e-technology. There is no question that the new opportunities acquirable through the World wide web offer new and innovative ways to increase profits and reduce costs. Consult with an expert in this area including a cross-section of your employees and illusion will happen.

 

Segment your customers into heavy individual and light individual categories and determine the difference between these two groups. What needs to be done to generate another understanding from both categories? All customers are critical. What can you learn about the different types of customers to determine whether more selling occasions possible? Make the most of these customers; you already have them.

 

Develop retention strategies as well as growth strategies. In today’s markets, it is as important to hold on to your existing customer base as it to grow your business.  It took you a certain amount of resources to attract your customers: you might want to explore ways to retain a high percentage. What is your cost to acquire a customer? What is your cost to retain a customer? Do your employees know?

 

Continue to look for augmented products and/or services that would add value without adding expense.

 

Explore opportunities to licence or franchise your business products or services for additional market share or penetration

 

Explore merger and acquisition scenarios where efficiencies would be gained for all businesses concerned.

 

Develop a relationship with a long-distance carrier whereby your company will distribute phone cards to your customer base in return for a fee or residual commission.

 

Salaries

This category typically contains charges associated with

Management Pay
Non-management Pay
Hourly Wages
Training Labour
Overtime Pay
All Other Pay, Wages and Salary items

 

 

 

 

 

 

Cost Saving Ideas

 

Establish a 45 to 60 hour per week work environment among the managers. Cost structures among your competitors are basically similar to your cost structure so you will obtain an advantage because your managers are working more hours. This assumes that your managers are productive. Managers who have responsibility for a workforce of hourly employees are usually at the facility, a retail outlet, restaurant or office at least this amount of time. Sometimes business volume is extremely low at primeval or closing hours. During the slow hours managers can save substantially by scheduling fewer employees and filling it themselves. In addition to the Labour savings, managers will become more knowledgeable about operations and will find ways to improve customer service, training and operations. I have place this procedure in place in several places. At the beginning there will always be resistance, but once managers get beyond the initial hump things will run smoothly. I also find that certain incentive programmes work well here. Get the manager’s incentives based on Labour dollar saved and they come to comprehend the process.

 

Effectively manage your salary administration programs. Many companies pay lip service to this principle but unsuccessful to obtain true levels of success in salary administration and management. To start, make sure you have a salary range for apiece position in the company. Salaries should be structured so that the midpoint is 100, the minimum is 80% and the maximum is 120%. The basic philosophy is that the candidate should be hired into a position between the minimum and the midpoint on the basis of his or her level of experience. The employees are then moved higher in the range on the basis of performance. This philosophy is based on the premise that mid-point is the amount the position is worth to the company. Employees can obtain an additional 20% through stellar performance. Few employees should be paid over the 120% range. Each job is worth a specific amount to the organisation. If a new hire needs training to become efficient in a particular job, that employee is working at a level below the worth of the position and therefore should be paid at the minimum salary range. When the employee’s performance rises at successful completion of training and can perform 100% of the job duties move the employee swiftly toward the midpoint of the salary range.

 

Insist that a salary survey be done apiece year to ensure that you have reached the desired community position relative to your competition. In this case the competition is those companies that would recruit your employees. You need to make sure that if you survey 10 competitors; you have a salary range higher than 75% of these companies for your key positions and higher than 50% of these companies for lower-level positions. Implementing this strategy will help you reduce turnover and will also ensure that you are not overpaying for positions.

 

Make sure your salary administration program grants for regular salary review. Typically, this is done once a year for salaried employees and apiece six months for hourly employees. The review should include a performance appraisal form and the employee’s performance levels should correspond with established pay increases. In other words, establish the pay for your performance review system.

 

Establish a bell curve of salary increases. Let’s state that approximately 8% of your employees are superior performers, 12% are above average, 60% are average, 12% are fair, and 8% are poor. Create a salary increase guideline that mirrors this curve, with the superior performing employees receiving higher increases. For example superior employees are given 6% to 7%, above average employees 4% to 5%, average employees 3%, clean employees 2%, and poor employees 0%. This grants the organisation to check and reward performance whilst still meeting its salary increase budget. Obviously, your goal is to continue to train and develop your workforce. Occasionally, low performing employees have to be replaced with those most suited to the position. The Bell curve is just a process to ensure that star performers are recognised and rewarded for their work.

 

Establish the salary increase guideline budget and stick to it. Plan salary increases for the coming year by using the Bell curve mentioned in the above idea. Department managers should budget salary increases for employees assuming that the next year’s performance will be at the same level as this year’s. Please be aware that some performance ratings will change. There will always be exceptions. This process will help ensure that your organisation will remain within the new salary increase budget.
The salary increase guideline budget should be preapproved. When a different rating is submitted during the year, treat it as an exception and make sure to justify it because performances can change- it might go up or down. A strict salary administration program will ensure that budgets are achieved.

 

Establish a training rate for all appropriate positions. This is crucial when your organisation experiences higher levels of turnover during the first and second months of employment. The training rate is lower than the standard pay rate and is applicable only during the training period. Employees are given a raise once the training has been finished satisfactorily. Determine whether the training rate could be established for other positions in the organisation.

 

Where the training rate is not appropriate, establish a probationary rate for the standard 90 day period. This rate is lower than the standard pay rate and is applicable only during the first 90 days of employment. If performance is satisfactory, the employee will receive a raise to the standard pay rate. Determine whether a probationary rate could be established for all positions in the organisation.

 

Develop a labour-management system whereby a individualized predicts regular or hourly volume and the amount of have needs on the basis of seasonality. Most businesses have a trend cycle that can be measured with 15 minute increments. First, you must find a way to get past the notion that your business can't be tracked this way. There is a pattern to your business. Discovering your business pattern is the first step toward determining how to manage your Labour cost. Management will give you many reasons why the business can't be tracked. Once you work through all their concerns, you and your team can refer those trend items, aspects of your customer activity that, in fact, can be tracked and schedule Labour accordingly.

 

Determine whether your new hires would remember for the targeted job tax credit program whereby a percentage of training dollars is refunded by the government.

 

Determine whether your organisation would remember for tax benefits for providing employee childcare services.

 

If your employees handle cash transactions, install software driven cash reconciliation process to save time at shift changes and at closing. This will also reduce cash shortages. This type of procedure also saves time in the cash out process.

 

Constantly look for software modifications that can reduce labour. Seconds saved could also mean dollars earned. Using technology is a natural approach to the whole effort of productivity improvement. If your business has not recently explored this area, effective tools that currently exist might surprise you.

 

Have an industrial engineer evaluate your business in terms of time and motion studies to determine whether additional efficiencies can be reached in areas where high throughput is important. This approach can still work today. Some managers run their businesses the same way they did 10 or 20 years ago. Time and motion studies can have an impact on cost savings, productivity, customer service, and employee morale.
Establish a self-regulating team with the specific responsibility of improving productivity and reducing costs in a particular department or area of the organisation.

 

Develop an incentive to reduce absenteeism. This incentive should be linked to productivity improvement goals and to the availability of the workforce. It should be based on reducing absenteeism from previous period. The incentives could be a pass bonus based on a 1% reduction in absenteeism

 

Develop a variable pay program whereby management salaries are reduced 5% to 10% crossways the board and these dollars are set aside into a bonus pool. When there is goal achievement, managers have the potential to acquire even higher levels of compensation. However, these dollars will be at risk if managers do not achieve profit objectives. The potential to acquire even higher levels of compensation will help sell this item.

 

Controlling your staff turnover is another way to reduce operating costs. Implementing strategies throughout the entire human resources cycle to ensure that all systems, procedures, policies, and practices are tight preventing employees from falling through the cracks. I refer to this as the human resources shut loop. If you think about it you will see that there is a cycle to the human resources process. It starts with recruitment, interviewing, selection and placement and continues to orientation, training, salary administration, performance appraisal, development, promotion, and finally termination. Then the cycle begins again. Make sure that all of the areas mentioned are employee friendly and are designed to retain employees. Identify any areas where improvements would reduce the number of employees leaving.

 

In order to determine where are to place additional controls, measure your have costs in terms of cost per unit, cost per test, cost per guest check, etc. Breaking your have costs down to the lowest unit will help you superior refer cost saving ideas. It will also make it easier to affect and control.

 

 

 

Other Personnel Costs

 

This category would typically contains charges associated with

Applied Payroll Burden
Superannuation Employers Portion
Vacation
Paid Holidays
Sick Leave
Bonuses
Short/Long term disability
Group medical

 

 

Cost Saving Ideas

Make sure your company has a program that offers all full-time employees the opportunity to receive a higher salary in lieu of accepting certain benefits (such as medical, dental and life-insurance). This day many employees are being carried on a spouse’s plan. Why not let these employees select a higher salary instead of benefits? As long as salary increases less than the cost of benefits, the company will save money and employees will increase their income.

 

Evaluate the cost of your superannuation administration. There are competitive programs that can reduce administrative costs. A easy evaluation of three different companies will determine whether you have an opportunity to realise savings. Even if you do not want to change the current superannuation administration you might still be able to negotiate superior terms by showing your evaluation.

 

Reduce workers compensation insurance by aggressively reducing accidents. Evaluate your workers compensation actual to determine your claims history. Most companies set an actual rate and never re-evaluate them even though their experiences change. Depending on your business you might be surprised at the potential savings here.

 

Using the World wide web conduct benefit surveys to comply your cost with those of similar organisations.
Challenge third-party providers to reduce administration costs by using the Profit Maps Model and passing those savings along to you.

 

Continue to monitor workers compensation costs and develop action plans to reduce them.

 

Develop a back to work programme that puts hurt employees in substitute positions. There are times when hurt employees want to remain active in the organisation and appropriate positions are available.

 

Negotiate settlements when long-term workers compensation situations dictate.

 

Eliminate alcohol at all company sponsored activities. This approach can prevent accidents, cut beverage costs at functions and reduce risks.

 

 

 

Communications

 

This category typically contains charges associated with

Long-Distance Telephone
Cellular Phone
Pagers
Data lines
Fax lines

 

 

Cost Saving Ideas

 

Authorise a telecommunications consultant to analyse all your communication costs in terms of rates charged, equipment used, and programmes offered, promotions available, usage, cellular phone options, long-distance carrier performance and pricing, fax and security line combinations, past bills, and so on. Structure the contract so that the consultant bills on the basis of percentage of cost saved or refunds received. In this way, there will be no cost to you if the consultant is not successful in improving your bottom line. Review all areas of communication to ferret out these pockets of expense that often go unnoticed. Pagers and cell phones are usually ordered and distributed without the benefit of an organised plan. There are real and meaningful discounts if you shop around.

 

Continue to renegotiate rates and terms with the vendors who wage services. Set up an ongoing procedure for constantly renegotiating rates and terms.

 

Monitor and control your communications cost on the basis of the cost per unit test (guests check, or that like) in order to determine locations for exerting any additional control.

 

 

 

Utilities

 

In this category typically charges associated are

Gas and Electricity Usage
Water

 

 

Cost Saving Ideas

 

Authorise a utility consultant to analyse your utility costs. Such consultants would know how to deal effectively with the local public service companies in order to discover advantages or missed opportunities associated with gas and electric services. They should be fully authorised to check existing equipment and records. They should be experienced in developing an index and analyses and creating demand graphs to spot situations where you might have been overcharged. They would also represent your issues to the public utility commission.

 

Pay your consultant on the basis of a percentage of the savings associated with his or her action steps. The typical rate is 25% to 30% of the demonstrated savings and refunds over a specific period of time. There should be no charge if savings are not demonstrated.

 

Take energy conservation action steps including setting thermostats at 72°F. Automatic controls should be place in place to control temperature during off hours.

 

Turn off lights in conference rooms, restrooms and officers when they are not in use.

 

Turn off all lights not related to security at the close of business.

 

 

Professional fees

 

This category typically includes charges associated with professional services such as

Legal and Human Resources Related Fees
Proposals (domestic and international)
Fees for Technical Services
Other professional fees

 

 

 

 

 

Cost saving ideas

 

Talk about fees. If your lawyer does not bring up the subject of fees, you should. Do not be shy. In business, lawyers are free to set their own fees. The ideal time to discuss is at the beginning of a new legal matter.

 

Try to settle cases rather than litigate.

 

Have lawyers design standard forms you can use in routine transactions.

 

 

 

 

Conclusion

 

The more you comprehend the power of this list, the more you’ll realize you must get your hands on all the other ideas to benefit your business. Go to www.profitmaps.com.au to obtain and use a easy 5 step process that can do this for your business.  

 

As mentioned apiece intent has the potential to increase your net profit margin by many % points. Research shows profits increase by 4%-56% and costs reduce by 18%-37% within 2 years. Usually a 5% reduction in cost is sufficient to turnaround most loss making businesses.

 

To obtain the maximum benefit and ensure that the actions result in improving your bottom-line you need a structured methodology or a process on an on-going basis such as the 5 step process recommended in www.profitmaps.com.au.

 

50 Ideas To Reduce Costs And Build Profits