Mitigating Business Cost Variance

One of the single most frustrating things as a business owner are costs and expenses that you cannot predict ahead of time. From natural disasters to wars and draught, there are thousands of reasons for the constant up and down in expenses some businesses experience. If you source product internationally like we do, with a high per item price tag, these costs can really add up. This post is about how you can fight rising costs that are beyond (or so you think)your control.

Separating Fact from Fiction

As a business owner or franchise operator, you have to carefully organize all of your investments and assets to fully understand the inner-workings of your business. After all, a business is a lot like an automobile.. there are a million moving parts and they all have to be checked up on and maintained for the entire vehicle to operate correctly as a whole. Your business is your car, now let's look under the hood!

One of the first things all business owners really should do first is categorize their profits and expenses. Profits are relatively easy to total if you are using a modern point-of-sale or P.O.S system. Expenses on the other hand can be a little more difficult as many are only documented via physical paper receipts that can easily be misplaced or forgotten.

In terms of sorting your expenses list, you want to break them down to variables and reliables. Reliables are costs that do not fluctuate or fluctuate very insignificantly over time. Variables are costs that go up and down, sometimes quite drastically, over medium to short periods of time.

Most variables are further categorized by type. For example, seasonal fluctuations are relatively easy to predict but can also be quite dramatic, especially around Valentines Day or Christmas, for example, depending on your industry. shipping_costs.jpg

Another cost, which get's all businesses but ours especially, are oil and thus, shipping costs. Since we import many of our appliances from overseas, when oil costs increase, we can sometimes be left paying nearly double for shipping for the same volume we ship every month. Shipping from China can be wrought with difficulty, but for us, the most difficulty thus far has been mitigating fluctuating oil price spikes.

Luckily, we recently switched to Freight & Cargo (F&C) for our China-U.S shipping needs and they have turned out to be a godsend. They can give us advance warning in cost increases and they try their best to balance severe upswings by using sound business management practices.

Find the Most Efficient Affordable Alternative

If you ship frequently or you ship high volume from places like China, Vietnam, Japan, Taiwan or South Korea, and you regularly experience swings in shipping costs that negatively impact your business, the first thing on your plate of tasks as a business owner is to explore other shipping alternatives.

Maybe you will find a more affordable or more predictable option, or maybe not, the fact is there is nothing to be lost in inquiring about costs as most shipping and logistics companies are more than happy to give you a free quote if you ask. Additionally, since most quotes are just first offers and lack detail, you can often negotiate these down, depending on the services you require, your timeframes, and your volumes.

Double Down & Reap the Profits

Once you've been able to accurately forecast your monthly expenses to within a thousand dollars of the course of a full your, then you'll know you've truly got your business finances in order. For us, we've been in the appliance business for over 25 years, and over that time we have used 3 different shipping companies and we request quotes every 2 years just to make sure we always have the lowest possible shipping expenses possible.growing_your_business.jpg

It is important to apply this cost savings benefit if you want to maximize your revenue. This increased revenue can then be re-invested in doubling down on growing your business, adding new products, or ordering more volume to lower costs. Never stop searching for ways to maximize the efficiency of your business!

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