Most businesses, particularly when they are still growing, tend to spend more money than is necessary. Part of this comes from trying things to see what works, and part of it may result from getting comfortable with certain services, vendors, or routines, and not exploring less costly alternatives. Chances are, you're leaving some money on the table that could be counting toward your profits. There are plenty of ways to find hidden profits in your business. Here are some you might try:
Pick the right business entity
Are you using the best business entity for tax purposes? You may be able to save some money by not filing as a Limited Liability Company (LLC).
"Most small-business owners do not know that they can elect to have their LLC taxed as a corporation and also make the S-corp election, which allows for a portion of earnings to be treated as long-term capital gains," explained Michael Hamrick, a partner at Acumen Business Management, LLC.1 "In 2018, long-term capital gains are being taxed according to your tax bracket, at either 0 percent, 15 percent or 20 percent. If you are paying yourself a salary and choosing to distribute capital gain income, this strategy could save you a lot in federal and state income taxes."
Adjust your prices
Are you charging the right amount for your products/services? If you charge too much, you risk alienating a percentage of potential customers, but if you charge too little, you won't profit enough. Coming up with the ideal pricing isn't always easy, but getting it just right goes a long way in optimizing your profitability.2 Become as familiar as possible with the market and always be ready to make changes based on the competition.
Explore alternative locations
Are you still in the same location that you started in? Perhaps it's time to move. Plenty of variables can factor into this decision. Do you have more room than you need? Are you in an ideal location to attract customers? Can you get a similar space at a greater value? Even if you're relatively happy where you are, it doesn't hurt to see what else is on the market or available for rent. You may be able to free up some extra money every month simply by operating from a different building.
Analyze your vendors
Take a look at your list of vendors and suppliers and explore options for each. Could you be getting a better deal from their competitors? Can you negotiate better prices with your existing suppliers?
Market Domination Media founder Jonathan Long highly recommends always seeking out multiple bids. "A startup I’m involved with in the health and beauty space found a manufacturer and was set to move forward with a large production order," he says. "They only contacted two companies and then picked the supplier that they thought was the best fit. It took a day of hammering the phones and sending hundreds of emails, but in the end, I was able to lock in a manufacturer that was 45 cents less expensive per unit. Now, at 10,000 units per order, that’s a savings of $4,500. Don’t be lazy. The extra work you put in can drastically reduce your expenses."3
Keep an eye on your marketing budget
You have to spend money to make money, and that includes marketing and advertising. The amount you spend, however, is up to you. It's easy to put the ad spend on autopilot, particularly in the digital age, but pay close attention to how much this is translating into increased revenue. At times, it may be worth tapping the brakes.
Consolidate high-interest debt
If you have various sources of high-interest debt, consider taking out a lower-interest loan to consolidate it into one regular payment and save some money that way.
There are many ways to find hidden profits. The trick is making it a priority and dedicating the time it takes to find the money-saving techniques that work best for you.
2. This NevadaSmallBusiness.com article discusses pricing methods: https://nevadasmallbusiness.com/tips-to-help-with-your-pricing-strategies/
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC