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E-Myth – “Why most small businesses don’t work & what to do about it”

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Accounting Outsourcing | Minimization Of Costs


Financially struggling business owners often become fixated with minimizing their expenses, even though minimizing expenses will not allow them to succeed says accounting outsourcing. The reason for this, is that while minimizing expenses is important, most businesses need to generate more revenue in their business in order to succeed, and minimizing costs will not help a business if they are not also increasing the revenue. Industry Canada says that 50% of all businesses will fail within the first five years of opening their business. And that 42% of those businesses will say that the inability to attract new customers was the reason for their business failure. Making the inability to attract new customers the most common reason for business failure. Business owners should eliminate the mindset that in order to increase wealth they have to cut expenses. Once they shift from that mindset to one of being able to increase their own revenue infinitely, business owners will be able to see that spending time on generating revenue will be the answer to their business problem.

Business owners should know that minimizing costs is important, but they should know what areas they should spend time on minimizing. If they organize their income statements in numerically descending order with the largest expenses at the top and the smallest at the bottom, business owners will be able to look at the list know that by spending time on the top half of the list, they will be able to affect the greatest change their bottom line in the smallest amount of time. Once they organize their income statement, they will see that among the items at the top of the list will be administrative labour and gross margin. Administrative labour will be just about the single highest overhead expense that a business will face besides Brent says accounting outsourcing. By working to ensure that administrative hours are not excessive, businesses can greatly affect their bottom line. By eliminating any administrative positions that are unnecessary, or reducing hours, or even re-tasking administrative staff to global tasks such as advertising and marketing or accounts receivable, they will be able to help offset the impact on the bottom line by creating revenue themselves. The next item that business owners can spend time on to affect their bottom line is there gross margins, the direct cost of labour including subcontractors, supplies and materials are the things the business owner needs to spend time minimizing the expenses, it will not only affect their bottom line but also help their products and services be more profitable.

Business owners need to take care not to spend time working on minimizing the expenses that are at the bottom of their income statement, because it will be an effective use of their time, the savings to those items will not pay for a business owners time to work on. Business owners need to learn what costs they should on minimizing, and then spending the rest of their time on revenue increasing and revenue-generating activities.

One of the largest business problems in Canada is the failure to attract new customers to businesses says accounting outsourcing. Industry Canada says that 50% of all businesses will fail in the first five years, and 42% of those businesses will say that the inability to attract new customers was the reason for their failure, making the inability to attract new customers most common reason that businesses fail. For this reason, business owners need to understand that no matter how many costs they cuts, if they are not spending time on revenue increasing revenue-generating activities, cutting their costs will only get them so far.

Business owners are often stuck in the employee mindset, which is employees canít change their salary so if they want to increase their wealth, they must cut their costs. However, when business owners open their business they should get into the entrepreneur mindset, which is they can create their own revenue increasing opportunities, and that they have an infinite ability to increase their income. So rather than cutting costs, they need to think of creating revenue as a way to grow their business says accounting outsourcing.

Business owners can spend some time in the business working on expense minimization, but they should know what expenses are worth giving their time to minimize. Since a business owners most valuable resource is time, and that time is limited says accounting outsourcing, minimizing the amount of time they spend on this is important. By organizing their income statements in numerically descending order, business owners can easily see what items fall to the top of the list, and those will be the items that will have the greatest impact to business owners bottom line. Most businesses will see that the top of the list or administrative labour, and gross margin. Rent is often a topless also, but business owners are very limited in what they can do to save rent costs because they are usually locked into a lease. That brings optimizing of the items there gross margin which are the direct cost of labour including subcontractors, materials and supplies. They can spend time minimizing those costs that will have a great impact on the bottom line is accounting outsourcing. Not only will it impact your bottom line, it will help your business be more profitable. The second most impactful thing they can work on expense amortization on is the administrative labour. Besides Brent, this is the greatest overhead expense business will see. They can work to reduce the cost of administrative wages by reducing hours or limiting positions if necessary to getting administrative staff to work on billable tasks in order to help offset the cost of their wages.

By working to see what items are going to be worthwhile and minimizing, then spending the rest of their time on revenue increasing in revenue generating activities, business owners can be assured that they will be more successful business than if they just were working to cut costs alone.