Looking to cut costs or boost returns? Here are seven ways to turn expenditure into investment.
Any financial advantage for a small business can make a big difference to its profitability and prospects. Being aware of where your money goes and the return on that investment is the first step, with the next step being making better decisions about what’s possible for your organisation.
Firstly, consider how to measure return on investment. Financial returns are straightforward to measure but intangible benefits, such as staff retention, are harder to translate into a dollar figure without benchmarking. Once you know how to measure returns, invest to boost efficiency, productivity and profits.
Achieving optimum efficiency means avoiding waste, whether that’s time and money or other resources like materials. Investing in the right technology will help you automate tasks and systemise activity so your staff can get through low-value work quickly and easily. Businesses commonly digitise administration, accounting and customer relationship management.
Efficiency cuts costs by trimming waste, while productivity achieves more with the same resources. This includes:
- Outsourcing Non-core Activities: If making widgets is the most profitable thing your business does, time spent on other activities is comparatively unproductive – find out what you can outsource so you can focus on doing more of what you do best
- Treating Staff Well: Research shows happy employees are more productive, so spending a little on maintaining morale – whether that’s drinks, thank-you gifts or other incentives – can boost your bottom line
- Renovating Your Workplace: The work environment has a big impact on productivity, so you could hire an expert to find out what needs to improve to optimise productivity
Earn More Money
In addition to efficiency and productivity, you can also make your money work harder. Boost returns by:
- Lifting Your Margin: Adding value to your product or service – investing in better-quality materials or training staff, for example – allows you to raise prices and increase your profit margin
- Winning High-value Clients: Focus your customer acquisition on more profitable, repeat clients and don’t be afraid to spend in order to woo them – for example, investing in a marketing strategist or wining and dining
- Investing Spare Capital: If you have underused capital, consider an investment portfolio for the business – for example, real estate has many tax benefits and steady returns in the form of rent, as well as capital gains potential (seek professional advice first)
Small businesses may not have the deep pockets of their larger counterparts, but with smart investments they can trim overheads and increase returns to earn a tidy profit.
Spending money doesn’t guarantee your investments will turn a profit. Read about some smart ways to invest in your business.