Four Ways to Save on Product Expenses As a Small Business
Posted on: 18 October 2016
When you're starting a small business, profit margins can be narrow, and keeping up with business expenses is a challenge. One of the best things you can do to increase your business profits is to find ways to save money on product expenses. Here are some cost-saving options for you to consider.
1. Hire a strategic procurement sourcing consultant.
Getting the right products and the right time for the right number of consumers is a tough target to hit. In the beginning, getting this balance right can be one of the main reasons why you struggle to raise profits. Contact a strategic procurement professional to analyze your product supply and ordering methods. An experienced consultant will be able to negotiate with your suppliers, help you fit better into a supply chain or goods and services, and help you get around other purchasing hurdles like ordering materials internationally. With the right advisement, you should be able to reduce overall product waste, erroneous ordering, and inefficient procurement methods that can cost you money and cause you stress.
2. Reach out to other local businesses that use similar supplies.
One way to reduce product costs is to share the costs with other businesses. For example, if you run a diner in a small town, you might contact the local bar and get the same supplier for paper products. You can bundle your orders together to benefit from bulk pricing and only pay one shipping cost. Other supplies that might be bundled with other businesses include fuel deliveries, lumber, paint, fabric, chemical cleaners, and condiments. If you're a unique business with few shared costs, consider cooperating in other ways. Share a building with a company that offers a complementary service (coffee and books, printing and photography, and so forth) to reduce rent and utility costs.
3. Save on shipping methods.
This step requires a closer analysis of your consumers' needs. Do they need cheap service, fast service, or the option for either? If fast service is needed, you'll often need to order parts and products with faster shipping times, which hikes the cost of your product and can cut into your bottom line. If possible, allow for slower services in order to save your customers money or book services well in advance so you can order supplies on an as-needed basis while still taking advantage of slower, cheaper shipping. For example, if you run a mechanical repair shop, you can book repair a week in advance, giving you time to source a cheaper part and have it shipped if needed. For those who need emergency repairs, tack on a fee to cover for the extra cost of an accelerated delivery.
4. Set up a barter system for suppliers.
Another great method for cutting down on product expenses is to use your product as payment for more supplies. For example, if you provide print services for your community, you order paper and ink in bulk from your supplier. If you were to provide "free" brochures, memos, and other printed products for your paper supplier for a discounted product rate, you'll save more. This "barter" system can be applied to your consumers too. For example, you might provide discounted printing services for an accounting firm in exchange for low- or no-cost business taxes. Business bartering, when done correctly, is an ideal way to buff up your profit margins.
Reducing your product costs is one of the most efficient ways to make your business more profitable. If you have more questions about saving on product-sourcing expenses, take the time to reach out to a strategic procurement sourcing consultant such as Principle Info Tech in your area.
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