The eCommerce industry is booming. Each year it takes a larger share of the overall retail space, and as the world becomes more and more digital, we can only expect more of the same in the future. However, as most business owners know, increased revenues come with increased costs, which is why you need to always be looking for ways to cut your expenses.
But many business owners are weary to do this, especially in the early stages of the business. The logic is usually based on the idea that making reductions will cut the legs out from under the business, slowing growth and potentially putting it in more severe danger. Yet this isn’t entirely true, especially if you’re smart about the way you cut costs.
Making clever cost reductions includes:
- Reducing the amount of steps in your systems and processes so that you can be more efficient with your time
- Finding out how to deliver the same level of service without having to bring in additional staff
- Automating certain business functions
- Being frugal about things such as utilities, office supplies and furniture.
Part of the reason it’s so important to manage these costs is
It Keeps Cash Flow Under Control
The number one reason small business fail is because they don’t know how to manage their cash flow. Understanding how accounts receivable and accounts payable work is critical to knowing how much money you have on hand at a given time and not over-extending yourself. And one of the secrets to managing cash flow is keeping expenses to a minimum, as this prevents all of your money from being tied up in overhead.
But beyond just keeping you afloat, managing cash flow will make it easier for you to grow the business. You’ll have a better idea of how things are doing, and this will make it easier to know when you should be more aggressive with the business. You will know when you have money to spend, and this should make it easier for you to say yes to exciting initiatives and no to those that carry too much risk.
It Allows You To Invest Where Needed
Another thing that cost cutting does to help you grow your business is that it gives you extra cash to play with. The idea is to slash operating expenses for non-income-producing activities such as HR, payroll, IT, and general admin so that you can use the money you save to invest in marketing and/or product development.
Many businesses wait until revenues expand to make these kinds of investments, but this just means you will be always one step behind. Instead, optimize your business and free up some cash so that you can inject funds into the areas of the business most likely to produce a solid return.
It Makes You More Agile and Adaptable
One key to growth is being able to capitalize on good opportunities, and if you’ve spent time cutting costs and making your business leaner, then it’s going to be a lot easier for you to do this.
For example, maybe you run an eCommerce store selling professional sports apparel. You want to make sure you have cash on hand to buy gear for the latest champion, as this will allow you to jump on these sales and get a leg up. However, if your money is tied up elsewhere, then you’re not going to be able to do this, resulting in money being left on the table.
It Helps You Maximize Value From Customers
A great way to reduce some of your costs is to use an automated customer relationship management (CRM) platform. These programs save you time by putting everything you need to know about your customers into one convenient location. This includes contact information, order history, site activity, lead source, browsing history, interests, hobbies, demographics, etc.
Then, the CRM platform will analyze some of the trends that come from the data you’ve collected, and it will do it all at a much lower cost than you could ever hope to do on you own. So not only does this save you money, but it also provides you with data that you can use to re-target customers and increase the amount of value you receive from them.
It Allows You To Handle More Volume
We know that expenses grow as volume expands. However, if you’re smart about things early, then this doesn’t always need to be the case. Automated solutions, for example, can be scaled rather easily and cheaply. And if you’ve done all you can to keep overhead such as rent and utilities low, then you don’t have to worry as much when your volume expands.
Furthermore, this will help keep margins high. You won’t need to worry that your success will backfire. Instead, you can enjoy much higher margins from your increased volume, which means more revenue and more opportunities to invest in the continued growth of the company.
Start Optimizing Today
This process of cutting costs to boost growth is known as optimization, and it should be built into everything you do. However, to develop a culture of optimization, you need to first understand its benefits to your organization. So hopefully you now see what these are so that you can begin working to make your business leaner and more profitable.
Contributor: Kevin is the Founder of the internet search service, Broadband Search. His passion is in developing and implementing a strategic growth vision for his companies and he believes optimization is an integral part of the growth journey.
Advice & inspiration to help retailers grow…