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Cut Costs to Increase Profit

By Dr. Robert Sullivan, World Wide Information Outlet
Friday, May 7, 2004; 12:00pm EST

What do you think is easier to do... reduce your expenses by 2% or double your sales? I think most would agree that reducing expenses might be easier. Why, then, do most business owners spend little time on attempting to reduce expenses? Consider this: Your current profit margin is 2% - if you reduce costs by 2% your profits double! Of course, you can do the same thing by merely DOUBLING your sales! Right.

It is amazingly simple to reduce operating costs by a few percent by being diligent. This article will provide you with a listing of some of the specific ways in which operating costs may be reduced. You may find that you can reduce spending considerably by observing only a few of the suggestions. And remember, the small stuff adds up! Think about saving each time you spend and you will discover your own ways to save.


  • Comparison-shop for everything.

  • Negotiate whenever possible. Ask! You will be surprised at how frequently a vendor will negotiate a price. Attempt to negotiate EVERY purchase.

  • Utilize mail order. It's quick and frequently the best prices are available via catalog sales.

  • Use the Internet to research a purchase. Nearly every vendor has a website containing product, pricing, and ordering information. This can be a tremendous time saver. Also, your research may lead you to a less expensive alternate.


  • Save and monitor your frequent flyer miles. Use them whenever possible. Also require your employees to return miles earned on company business back to the company.

  • Consider a travel club. Many provide discounts that you cannot obtain as an individual.

  • Try to combine travel, hotel, and automobile rental into a single package. This can frequently save you money.


  • Before you decide to pursue a legal course of action, consider the chances of being sued in return! This might result in greater costs than you would receive from your initial action.

  • Consider arbitration or mediation as an alternate course of action to resolve a legal problem. This can produce quicker results at less cost.

  • Get your attorney involved early in any possible crisis.


  • Monitor energy usage. Utilize auto-setback thermostats and auto-off light switches.

  • Have an energy audit performed by your local utility company. Their suggestions can save you considerable expense over time.

  • Ensure all employees are "energy aware." Start a contest and give a prize to the employee who provides the best suggestion for saving energy.


  • Educate yourself about the various postal rates. Visit the USPS website at http://www.usps.gov/ for complete descriptions of mailing options and rates.

  • If you use a postage meter, ensure authorized personnel lock it when not in use. Note that the Post Office will refund any machine imprints that were not used.

  • Plan your shipping or mailings to avoid overnight or second day delivery that is MUCH more expensive than alternate methods. If you must ship overnight check the various carriers as well as the post office for the best rates.

  • When providing customers with literature (sales, technical, other printed information), use e-mail or FAX if possible.


  • Ensure your company (or personal) vehicles are classified properly for maximum savings.

  • Review your various coverage's to ensure you are not "double insuring."

  • Do an annual insurance review to make certain you have coverage you need but are not carrying something unnecessary.

  • Have an effective safety program! Just ONE workplace accident can send your insurance rates skyrocketing.

  • Make certain that all employees are classified properly for workers' compensation insurance. Rates vary widely.

  • Shop for all your insurance needs and periodically ask for competitive bids.


  • Monitor office supplies. My guess is that at any moment you have twice what you need!

  • Purchase office supplies from discount suppliers. Shop by mail.

  • There are numerous discount mail order suppliers. Get on their mailing lists so that you are aware of their sale items.

  • In general, extended equipment warranties are not worth the cost.

  • Monitor telephone usage. Shop carefully for your long distance and/or 800 number suppliers. Prices vary widely as do the various fees.

About Source of Article
Robert Sullivan is the author of The Small Business Start-Up Guide, and United States Government - New Customer!. He frequently lectures on starting small businesses and appears on CNBC's "Minding Your Business" as a small business expert. His books may be ordered toll-free by calling 1 800 375 8439.

Robert also developed and maintains an extensive award-winning Internet website, "The Small Business Advisor," at http://www.isquare.com/.


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