While most of the Falling in Love with Finance series is about fiscal management, today I want to address how SMB’s can reduce their operation costs with very little effort. If done properly, small businesses can add profits to their bottom line that are meaningful and sustainable without hiring an operations manager (or if you have one – they can gain savings by deploying these tactics too!).
Most SMB’s are focused on growing their business, which is exactly where it should be. However, with a little bit of effort, increases in profitability that can affect you’re bottom line well into the future can be captured easily through working your operational expenses There are plenty of organizations that offer savings to small companies, but many of them are simple discounts. The question is always “Discount off what”? Are you getting a discount off of an inflated price? How do you know that you’re really getting the best deal from an advertised discount program? I’ve found that many savings programs are available to SMB’s, you just need to know where to look. Typically, the best sources of information on savings programs come from vendors and trade associations that are familiar with the needs of their clients and members and therefore develop meaningful programs.
If you’re an SMB and you’re considering a savings opportunity, always ask how the program works and why are savings being offered. If the answer is simply “We have a lot of people using it so the vendor gives us a break”, you may want to look elsewhere. Any program that’s good for SMB’s, but doesn’t sound good for the suppler usually isn’t providing much savings, or the vendor won’t offer it very long. Programs that are build based on the vendor being able to reduce operational costs, that are then passed along to the members work extremely well. You can’t expect vendors to lose money and if the program is designed so that costs are removed from the procurement process and then delivered to the end user, everybody wins.
When looking into savings programs, always try to understand what the benefit is to the supplier. Once you know how the program works and how all parties are benefiting from participating, you’re ready to get a proposal on exactly how much your savings will be.
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