We all fall into a sales slump from time to time, and the greatest danger for…
A Simple Tip to Stop Out-of-Control Spending
Looking at every cost as an annual amount can be upsetting here is one simple tip to stop out-of-control spending.
A little trick I learned many years ago, and one that really helps me to make business decisions, is to look at every business expense as an annual amount. For example, rather than look at my internet subscription as a $25 a week expense, I look at it as a $1300 a year expense. When we look at the annual cost, we tend to look a little closer at just how much everything costs us.
Work out the annual cost of each item
Now I understand how simple this technique is, but I’ve realized over time that not everyone looks at money the same way. Every few months I go through all of my business expenses and work out the annual cost of each item. Apart from being a little disconcerting, it puts every expense into context and it makes me much better at managing my money (and deciding what to stop spending money on).
For example, if I look at a subscription that I’m paying say $50 a month for, and even though I don’t really use it, it just keeps auto-renewing, until I stop and realize it’s actually costing me $600 a year, an amount that I could use for something more substantial. And when I think I’m paying $600 for something I’m not even using, I’m much more motivated to go to the trouble of terminating the service.
Do you have your business expenses under control?
A lot of business owners have no idea how much they spend on various items – but we all should. If you don’t have your expenses under control, you don’t have your business under control.
The other side of having a tighter reign on our costs is to have a look at the impact of increasing our prices. Let’s say in the space of a year you have 1000 customers. Increasing your prices by as little as five percent will increase your turnover by thousands of dollars. The impact on profitability could (and probably will) be incredible.
At the same time, it’s much better to have regular smaller increases as opposed to big increases every few years, but that’s not the main point of this article.
Increase your prices and explain it to your customers
Think for a second about how much extra revenue you would create if you increased your prices by five or ten percent? Now I understand that sometimes it’s not that easy, we live in fear of wondering if our customers will pay or run away. From my experience, if you explain really well why you are putting up your rates, and make it all about them, and value for them, they will be OK. But I’ll write another article about that soon.
A simple tip to stop out-of-control spending
So, my advice, look at all of your expenses and all of your income in terms of the annual amount. See if that changes how much you spend and how much you charge. I bet it will.
Originally posted on inc.com
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