Revenue when subtracted by expenses produces profits. The equation is simple to understand but frustratingly hard to implement.
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It is so frustrating that business owners literally cry out aloud unable to control the subtle – but very powerful – elements that govern the above equation. Revenue lags, expenses abound and hence profits are barely visible. While revenue is truly a function of marketing and sales, expenses can have various layers that you need to have control on. Here are some fancy expenses that you could do without:
Huge office spaces
A very conventional way of running a business would be to start off with a fancy office complete with air-conditioning, woodwork, and interior design. It's funny that some of the most successful business – with exceptions like coffee shops, restaurants and retail stores – never started with any of that. I have been a major proponent of bootstrapping and fancy offices are never a part of the "to do" list a bootstrapping entrepreneur starts off with.
Aggressive marketing spend
It's not to say that marketing spend itself is unnecessary – that's far from the truth. However, spending too much on marketing (especially when you don't have a way to track marketing expenses to returns) is avoidable. Spending too much just to grab market share on marketing channels that you are unsure of for your business is a real fancy expense. Marketing spend should be guided by your business strategy and it should be tracked to returns; any spend without this element is fancy.
Equipment, infrastructure and energy
Most small business owners might overlook this, but the recurring spend on energy – thanks to energy grabbing servers, computers, etc – can add to the spiralling costs of a company. Add to that the extensive setting up of infrastructure and equipment and you really have no other go but bear the cost of running an expensive drain hole. Think green and go for energy efficient equipment for your business, outsource your data-centre needs, embrace cloud computing or implement virtualization (if your business demands it).
Competent and resourceful employees come at a price. However, you are not bound by your local geographic precincts to hire or source talent from. Go global. Resort to telecommuters. Devise radical hiring structures by going completely virtual or hiring freelancers. Pay per projects or per hours instead of full-time income. This not only reduces your expenses for payroll but also allows freedom for your employees, not to mention the incredible talent available overseas for a fraction of the cost.