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How Is It That Some Businesses Can Keep Their Fixed Costs Down While Others Can’t?

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It’s often been said that in order to make money, you have to spend money. But there’s an oft-forgotten caveat that should accompany any such statement. And that is that you should spend as little money making money as possible!

There are plenty of places businesses are going wrong in the modern world when it comes to their fixed costs. These are costs that are necessary to keep their operations alive, but that don’t vary depending on output. So we’re not going to be discussing things like stock.

Instead, we’re going to be looking at the things that every business has to at least consider in order to start its operations. And we’re going to find out where some businesses are going wrong.

Premises.

If you’re a startup and you’ve ever looked into the prices of commercial premises, I’m sure that you will have been shocked. Yes, I am afraid that they can be expensive.

Fees can include hiring out the right people to manage the exchange of the premises, like solicitors. Then there is the cost of refitting a shop, constructing a building or renting existing premises. Add on top of that some rather extortionate taxes and you end up with a situation where your business is going out of business before you’ve started.

So what can you do? Well, now that we have solutions, like cloud computing, physical workplaces are less important. Yes, there are some businesses that will need premises. But there are many that don’t.

Take your average consulting business. You may find that you don’t actually need physical premises of your own in order to carry out your business. In fact, you may simply be able to go to the client’s premises or conference online. Should you need an actual physical location on the client’s request, you can easily rent a meeting room for an hour or two. Thus, the costs of having an office are a fraction of what they could be. And your clients benefit as you can pass on a portion of the saving to them.

For those businesses that absolutely require a physical premises, make sure that at the end of your contract you renegotiate. If you’ve been a good tenant, you’ll be in a much better position to ask for a better price on the rent.

Also, look for cheaper alternatives when negotiating. Make the property owner aware that you’re prepared to take your business elsewhere.

Keep Your Assets Maintained.

Everybody who has spent more than five minutes doing business accounting knows about depreciation. Depreciation is the constant reduction in the value of your productive assets. What poorly run businesses tend to forget is that you can actually do something to slow depreciation down.

If you have heavy equipment, like forklift trucks, carry out regular maintenance. Focus especially on the areas of the vehicle that have moving parts. Things like the gearbox and electronics can be easily lubricated and cleaned, but can cost a lot to repair once something goes wrong. In addition to keeping your equipment in good condition, you can also purchase used machinery and forklifts to save money – find them here.

If you’re office-based, keeping your office equipment in good condition can save you money. Companies like Scope Business Imaging specialise in keeping printers and photocopiers maintained. Just like your car, they need to be serviced on a regular schedule in order to last.

Shop Around For The Best Insurance.

Business insurance is a tricky business. Often the insurance process requires and in-depth conversation about the precise nature of the firm. Insurance firms want to have an exact picture of the risk profile of your business.
Shopping around for business insurance is one way to keep costs down. But so too is investing in mitigation equipment. Things like security alarms, cameras and data security are important bargaining chips. They can all be used to reduce the immediate cost of insurance to the company. The best firms use them as a negotiating tool. The worst firms don’t.

Finally, a major expense for many firms is vehicle insurance. Vehicle insurance premiums are best reduced by making sure that your fleet of drivers doesn’t incur claims. Many firms have a fleet of vans operative by various engineers and service personnel. It can often end up saving you costs in the long run if your engineers are better trained as drivers.

Regular training and driving refresher courses can help reduce the number of times your engineers are at fault. This will ultimately lead to lower premiums in the future.

Sales And Marketing.

Effective firms are always on the lookout for sales and marketing ideas that won’t break the bank. Thanks to social media platforms, these opportunities now abound.

One thing that the best firms are doing is turning their marketing into something that is interactive with customers. This could be through a competition or something else. Things like only offering rewards to customers who dress entirely in red.

The best companies recognise that such plays can go viral. Launching a campaign like that over social media is much for effective that a campaign that simply offers free drinks. That’s because it gets people talking about your business and sharing it among themselves. In other words, it creates a buzz.

Businesses that aren’t so savvy won’t bother being so creative. They’ll choose expensive marketing companies to work on their behalf. Ultimately, it’s their bottom line that will suffer.

Finance.

Finding any sort of finance for your business is tough. Finding cheap finance? Impossible you might say.

Thanks to comparison websites, you can now get a handle on which banks offer the lowest rates. At the moment, for business loans between £7,500 and £15,000, the going rate is around 3.5 percent.

Lean businesses will try, if they can, to stay within this borrowing bracket. That’s because the cost of taking out a loan starts to rise dramatically once you go above £15,000. It’s not atypical to see rates rising to the 10 percent mark.

Remember, 3.5 percent is the best rate you can be offered. You may not get it depending on how risky a borrower the lender thinks you are.

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Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.

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