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

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Accounting Outsourcing | Minimizing Of Expenses

Industry Canada statistics say that 50% of all businesses will fail within 5 years, and 42% of those failed businesses say being unable to attract customers was the reason for their failure says accounting outsourcing. Business owners who are struggling financially often become fixated with minimizing expenses, even the expenses will not allow them to succeed, they need to generate more revenue for customers.

Many business owners who start out, tend to have the employee mindset which is they are unable to increase their salary so in order to increase wealth must cut their costs says accounting outsourcing.. This is a problem for entrepreneurs, because the problem in business is not that they have to cut their costs in order to increase wealth because they have unlimited opportunities to increase revenue infinitely. What they need to do is shift their mindset to thinking that if they need more money, they need to produce more sales. Business owners who are in the employee mindset often think of costs that they have to cut as the ones that are similar but once they have at home utility bills, phone bills, and none of these are the things that truly affect a businesses bottom-line.

In order for business owners to learn what expenses will truly affect their bottom line with minimal effort, business owners should organize their income statements and numerically descending order, so that is expenses will be at the top page, and the inconsequential expenses will be at the bottom. Business owners can then look at the top half of the page and realize that by spending their time cost the top half will affect the bottom line more greatly than working on any of the stuff on the bottom. Business owners will find that the top of the statement will include rent, administrative salary and gross margin. Itís very difficult for a business owner to affect any cost savings on rent, unless they move or break their lease, so once the business owner is in the right space that cost canít be changed. However administrative wages will be the most expensive overhead besides rent that has any true effect on the bottom line. Therefore business owner must always make sure that administrative labour is always minimize. Reducing hours whenever necessary, eliminating unnecessary staff, directing admin staff to billable tasks such as Accounts Receivable or sales and marketing. That way they can help offset the cost of the administrative labour. The next thing that is on that income statement is gross margin of the business. Accounting outsourcing says optimization of gross margin will give them with the rate of return, they can save money on the direct cost of labour including subcontractors, supplies and materials that will be great use of business owners time because that can make great savings on their bottom line and help them be more profitable.

In order for business owners to succeed in business they need to illuminate the thinking that cutting costs is the answer to business success, they need to know what are the best things to spend their time on cost saving, so that they can spend the rest of their time on increasing the revenue.

business owners who are financially struggling become fixated on minimizing their expenses, even though minimizing expenses will not allow them to succeed says accounting outsourcing. The reason that minimizing expenses is not going to help struggling business, is because businesses need to generate revenue. Industry Canada says that 50% of all businesses will fail within the first five years and 42% of those businesses will say that they were unable to attract enough customers. Making revenue generation the number one reason for business failure in Canada. Cutting costs only do so much, they will help successful business become more successful, but they will not save a failing business because failing businesses need more sales.

Business owners need to understand that since time is one of the most valuable assets, and it is extremely limited, that they need to be spending most of their time on the activities that are going to increase their business. They need to work on their advertising and marketing KPIs. The only effective marketing strategies are the ones that are done on a consistent basis says accounting outsourcing, so itís very important that business owners not only make time to do their marketing, they make time on a regular basis. Not only should they work on their marketing strategy but they also needs to be constantly evaluating their marketing efforts in order to know which continued, changed, or eliminated. If a business owner has the ability to spend money to buy time, that is often a good strategy as long as they can trade money for more time at a lower rate than what they can do. If they can hire someone to do something more efficiently or cheaper than them they should do that.

Some of the business owner has all of the time in their business to marketing and sales, they can focus a bit of time on minimizing expenses, but they know what expenses they should minimize says accounting outsourcing. They should organize their income statements in numerically descending order so that the highest cost items at the top of the list. That way they know that by spending time on minimizing expenses that are on the top half of the list, they can truly affect their bottom line. Business owners should avoid spending any time on minimizing the expenses on the bottom half of the list, because it wonít be worth their time spent on the little bit of money they save.

The expenses that business owners will see her at the top of the list and will make the largest impact on their bottom line are administrative labour and gross margin. If a business owner can minimize those costs, they will be able to greatly affect their bottom line.