- eCommerce

Cost-Cutting Can Supercharge the Growth of Your eCommerce Business

At the top of all our priority lists is cutting down on expenses. A business must always spend less than it makes, and there are really only two ways to do this: spend less or grow more.

However, this doesn’t need to be a zero-sum game. Cutting back on costs doesn’t need to mean cutting back on growth. It could mean simply being smarter about your taxes, or it could mean optimizing systems so that they work better.

In fact, if you’re smart about the way you reduce overhead, you’ll find it easier to grow moving forward. Here’s why:

Better Cash Flow and Investment

Improper cash flow management is the number one reasons business fail after they first start. And a lot of these cash flow problems come from inexperience. Being new to owning a business, it’s easy to take missteps that cause you to spend more than you need to run the business.

As a result, your growth potential is swallowed up by your expenses. So in this sense, your ability to reduce expenses over time is going to be part of your growth. It will help you improve margins, making the business more profitable without having to expand volume.

However, at some point, we do want to expand volume, which is why this increased cash flow resulting from clever cost cutting is most effective in stimulating growth when it’s invested. Because you have less money tied up in distribution, or office space, you can put more into product development and marketing, which helps the business reach new markets and truly expand.

Optimized Productivity

At some point in the life cycle of your business, it’s going to become necessary for you to find ways to do things with less. It’s not only quite expensive to hire a new employee, but as you become larger, it becomes that much more costly for you to get bigger, slowing overall growth.

As a result, it’s important to find ways to streamline your business. Remember: time is money. So anywhere you can cut out excess work or eliminate redundancies, you’re increasing the amount of time people spend engaged in productive activity, allowing you to move more inventory cutting costs instead of increasing them.

When the business grows large enough, it gets more and more difficult to recruit new customers, which is why you need to work to optimize the business right away. This will allow for more rapid growth in the beginning, and also a faster maturation of the business.

More Autonomous Work Units

Building on this, a business that builds separate yet cooperating business units are going to be able to grow more quickly. This is because each unit only needs to focus on one thing, which makes it easier for them to find the best way of doing it.

One of the most effective ways of cutting costs is outsourcing and automation. Hiring specialized firms to help you with one aspect of the business, or using technology that makes it easier for people to do their jobs, means you can do more with less. But in doing this, you’re essentially creating more autonomous work units, both internal and external.

This makes it easier to divide work moving forward. For example, if you outsource payroll and other management accounting practices, then your internal team no longer needs to dedicate the same amount of time to these functions. This allows you to move things around and set your organization up with the best possible division of labor.

Some Ways to Cut Back

Clever cost cutting can clearly have a major impact on the growth of your business. So to help you do this with your company, here are some things you could be looking at to help you cut costs:

  • Consider offering remote work opportunities so that you can reduce the amount of office space needed, and also so that you can hire people residing in countries where the cost of living is lower, as this allows you to cut down on labor costs.
  • Outsource and automate wherever you can. Determine what it is you do best and then outsource and automate the rest. There’s no way you can become a specialist in all aspects of the business. So it’s better to become perfect at one thing and then rely on others to do the rest.
  • Find new service providers, such as broadband internet, phone, electricity, etc. Sometimes we get caught up with one company, totally ignoring equivalent yet cheaper options.
  • Audit All Systems and Processes. Spend some time analyzing the way you do things to determine if there’s a cheaper way. For example, could you be using a POS system that charges fewer fees? Or could you make use of Fulfillment By Amazon as a way to reduce shipping and customer service fees? These changes can result in huge savings, which you can then use to grow the business.

Time To Take Off

Just like you need to cut the sandbags off a hot air balloon for it to fly, to grow your business, you need to get leaner and lighter. Audit your systems to see where you could be doing better, and consider getting help from third-party vendors and technology.

Doing this will free up some cash in the business and make you more efficient, which leads to more investment, better returns, and growth down the line.


About the Author: Kevin is a serial entrepreneur and the founder of Vast Bridges, a customer acquisition and lead generation service. Most recently, he and his business partners launched Broadband Search, a website designed to help people find the best and most affordable broadband internet service providers in their area.

Cost-Cutting Can Supercharge the Growth of Your eCommerce Business

 

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