Cut business costs – how to stop money leaking out your business
First off, you know you have a money leak in your business when if feels like you’re getting the money from your sales and it all disappears. It feels like there is basically nothing left ever.
Every time it comes in, it vanishes.
Every time it comes in, it vanishes.
Repeat, repeat, repeat week after week and month after month.
That is a good sign that you may very well have a money leak in your business.
So how do we stop money leaks in our business?
Well, I have an exercise that consists of two parts to share with you, to find and eradicate the money leaks that may be happening in your business. This is an exercise that I do with clients, this is an exercise that I do with my own business every single quarter and I highly, highly urge you to diarize some time to do that too.
So first off, what you need to do is you need to pull out your last 12 months business bank and credit card statements. Anywhere where there’s business spending happening, I want you to pull out those statements for the last 12 months. Now, some people here might wanna scrimp on that and just do a month or three months but I promise that 12 months is needed because you’ll have stuff that reoccurs annually and you’ll miss it if you do not pull out 12 months. So please please do pull out 12 months. Now, ideally the best way to do this, is to do it with the physical statements. So printing off your online statements or if you get statements in the post, dealing with the physical statements is by far the easiest and the best way to do it. However, if you do not want to do that, if you don’t have a printer, if you want to preserve the paper, the ink, et cetera, et cetera then you can do this by downloading the CSV files by downloading the Excel files from your internet banking and then doing it in Excel, but I highly highly recommend printing it out. I personally find, it is by far the easiest way to do it. And I’m going to talk you through how you would do it with the print-out but you can adapt this if you’re gonna be doing it electronically. So I want you to gather together that stack of paper, pick up a red pen and a highlighter and perhaps make yourself a cup of tea or maybe even something a little bit stronger because we’re gonna be working through this stack of paper. And what I want you to first off, is to take that red pen in your hand and I want you to go through every single line on every page when you’re looking at the expenses. You can ignore the income side. Look at the expenses. Line by line by line, item by item, every single page and for every single entry in the expenses, I want you to ask yourself this question, is this expense 100% necessary to keep the proverbial lights on in my business? Is this 100% necessary, not a nice to have, not a oh it’s really handy, 100% you cannot run your business without this expense. And if that is the case, I want you to circle that expense and I want you to be really honest with yourself about whether it is 100% necessary. Something like insurance, 100% necessary. So is this expense 100% necessary in my business to keep the lights on, to keep it going, to keep it running. If the answer is yes, you circle that with your red pen. And you go through every single page of the whole stack. Go through every single one. And then once you’ve done that, I want you to flip your bundle back over again and this time take your highlighter in your hand and this time ask yourself, is this expense delivering me a positive return on my investment? So, is it giving me back more money than I am spending on it or is it giving me a positive return in terms of time? So it is delivering me time which means that I have more time to spend on the sales and marketing and revenue generation in my business, okay? And again, I want you to be really honest with yourself here, particularly on the time one, because what I find is people say, oh yeah this is saving me so much time but they’re not then using their time to generate revenue. So they’re not turning it into a financially positive result. So again, line by line, item by item by item and you’ll find that you may very well be asking yourself this question 12 times when you look at some expenses. That is completely okay, it’s not a problem to be asking yourself and checking with yourself 12 times on one thing. You will also find that some of them, you may be highlighting things you’ve already circled in red pen. Again, completely fine to both red penned it and highlighted it. That’s not a problem either. But again, I want you to go through every single item, line by line by line on the expenses side and be really honest with yourself on this. Now, once you have done that. I want you to flip back over again to the beginning of the bundle. Now, of course if you’re doing this electronically, you’re gonna be scrolling, perhaps you choose two different colours or you put an X in the column or something like that when you’re doing it electronically. But with the paper you’re flipping back to the beginning of the bundle again and this time I just want you to skim through. I want you to have a look and find those things that you’ve neither marked with a red pen nor you have highlighted. So they are blank. Now the question with those things is, is this a money leak in my business? And the answer may very well be, yes. Because these are things that are not necessary to keep the lights on in your business and these are things that are not delivering you any positive return. Therefore the questions becomes, what is the purpose of this spending? And that is something you need to be really honest with yourself about because the money you are spending in your business on nice to haves and stuff that you kind of like, that is taking away money from you and your family to enjoy. That is taking away money that you can be taking out of the business for yourself or you could be spending in a positive way to deliver a higher return and therefore generating more revenue and more profit for again, for you to take more money out of your business for you and your family to enjoy. And that is what it comes down to. So looking at all those ones that you have not marked. Are they actually money leaks in your business? The likelihood is some, if not all of them, will be money leaks in your business and that means that you can start going through and eradicating those expenses when you can. Now, you some you might be tied in to contracts and you may not be able to cancel them straight away. For those you wanna pop a time in your diary, whenever it renews, so that you know you have to go back and cancel this before their renewal date or before you get stung again for another year. So making sure that for any of those that you can’t cancel straight away, that you can’t stop straight away, you pop a time in your diary to set aside to do that so can you can eliminate the money leaks in your business. So that you can operate a business that is financially healthy with lean expenses. With expenses that are in alignment with your vision and in alignment with what you want to do for you business.