Just as with your own personal finances, growing the worth of your business means working towards attaining more assets and fewer liabilities. You can achieve this either by reducing your expenses or investing in acquiring more assets – but if you want faster results, you need to tackle both of these aspects simultaneously. We take a look at a few ways you can get this right, growing your company’s net worth while you cut costs.
Develop and protect your Intellectual Property
If your business has already spent time, money and resources developing a new product, it makes sense to take full advantage. Intangible assets like patents, trademarks, copyrights and designs, trade secrets or processes can all be potentially commercialized – as they can be sold, transferred, franchised or licensed out just like any other asset. Get familiar with the IPR regulations in your region, protect your IP and leverage it to increase your business’ net worth – all without increasing costs. Read more about what to do if your intellectual property rights are being infringed.
Invest in your own property
Just like your home, if your monthly rent is one of your biggest expenses, that money might as well be going towards an asset you will actually own one day. Turning a recurring cost into a resource is the ultimate way to transform liabilities into assets. Finding the right property for your needs – and one which will allow for expansion and growth – does take time, of course, so start monitoring the commercial property for sale in your area and surrounds now. The more familiar you become with the market, the easier it will become to spot a great deal.
This principle applies to all recurring expenses. Examine each in turn carefully and do the math to figure out where it would actually be cheaper to purchase something outright (thus gaining an asset) rather than continue to fork out every month for years to come.
Invest your working capital wisely
While it’s important to have easily accessible funds for unexpected costs or to take advantage of an opportunity for growth, investing a portion of your profits where they can earn interest is always wise. Make sure you reduce the costs associated with your daily working funds and business bank account by taking advantage of lower-charge digital channels, ensuring you have the best account type for your needs, and taking advantage of any rewards programs linked to your business credit card that may be helpful in cutting other costs.
Weed out unprofitable products or services
For each of the products or services you offer, take the time to do a cost-benefit analysis on each and work out which products actually bring you the most (and least) real revenue. By discontinuing or phasing out the least profitable, and giving greater focus to the most profitable, you can make sure the money you do spend is going where it’s most likely to boost growth. Doing this exercise may also enable you to spot larger trends or identify areas where costs could be easily reduced – such as purchasing a certain raw material in bulk or downgrading to a smaller software package if only a handful of your services actually depend on it.
Eliminate debt as quickly as possible
Whether it is asset, invoice, vehicle, startup or equipment financing, most businesses find themselves incurring debts at some stage. Negotiating with the lender to pay your debt back faster can save a small fortune in the long run – especially on large sum loans. Create a ‘plan of attack’ for each of your debts and stick with it. The faster your business assets become truly yours, the sooner they can be added to your net worth – and the faster your costs will come down, allowing you to invest those extra funds back into your business.
Incentivize employees to reduce costs
Implementing an incentive plan where you pay your employees a bonus based on any cost reductions, they manage to implement is a great option for several reasons. Because they’re actually motivated to look for the best deals and options on your behalf, your employees become your eyes and ears on the ground and take the pressure off of you to find ways to reduce expenses. They may find ways to do so that would never have occurred to you – and as an added benefit, feeling that they’re able to take initiative and responsibility for growing their own income is great for morale, engagement and overall productivity. Another option is to implement ‘comp days’ as a reward – giving employees an extra day of leave if they manage to reduce expenses.