When was the last time you talked to your suppliers about the price you are paying for your materials or stock? If you are like most business owners, this may be a question where your answer is "Never". Strange isn't it? We seldom review or query some of our largest business costs, yet we continue to accept and absorb price rises from utilities, rent and suppliers. Still accepting suppliers price increases without fighting back? This is akin to death by a thousand cuts. Slowly but surely you are allowing your profit margin to decline as your cost of goods and overhead expenses rise. It may be time to ask your suppliers to sharpen their pencils....
I t may have been quite some time since you last raise prices on your products or services. This is a valid option and the quickest way to increase your profits. Don't sit passively by whilst evryone around you is lifting the cost of your supplies,wages,taxes etc. If this is allowed to go on eventually you will lose profits and become a non feasible business.
Do yourself a favour. Put aside some time inside the next week to review your overheads by listing them out and converting each category of expense into a percentage of the revenue. Then order the expenses from highest to lowest. Set a target reduction in your largest expenses of 10% (wages are not part of this exercise) - you may not achieve this reduction but, at least by setting a goal you have something to aim for. Contact your suppliers and ask them if:
- they offer price reductions on certain sized orders
- they give discounts based on how promptly you pay your account
- they will extend your terms by 30 days
eternally shop around for suppliers. Unless they have exclusive stock lines, you do not have to accept their price rises. Attempt initially to obtain a price reduction - this goes straight to your bottom line. If you cannot attain this, dropped back to better conditions of payment etc. Make it a goal to go through your top ten expenses and try to get them down by 10%. Depending on how large your turnover is this can add up to a significant amount of money for you. Monitor your costs and prices closely. Whenever there are increases in your costs be sure to analyse these to see if you can influence their reduction - if not, review your prices and productivity. Both may need some tweaking.
