Creative thinkers like you can’t help it! You love that zone – the ideas are flowing, the images are popping, and the phrase, “let’s try this” is on repeat. Satisfaction feels new… every time you say, “That’s it – let’s go with these!”
Because you’re taking such good care of your clients, your business is rapidly growing!
And since your business expenses are growing too, I have 4 questions that’ll help you:
- grow your bottom line
- gain financial control
- create wealth
First, let’s embrace a word that unfairly earned a bad rap – Audit. When you control the when, where, and how, an audit can be a powerful business tool. In this post, I’ll focus on a Cost Audit for your business expenses.
Second, let’s recognize that while there are different types of expenses, none are truly exempt from annual review (e.g., even business insurance can be shopped).
The Cost Audit involves 4 questions you need to answer for every business expense:
- Why do I NEED this expense?
- What’s my return on investment (ROI) for this expense?
- Is there an alternative that COSTS LESS without sacrificing my needs?
- Can I ELIMINATE the expense without a negative impact on my business?
The “why I need the expense” question isn’t a simple yes or no response. It’s more about assessing what’s different now and how that affects your spending.
Think about the following things:
- Has my clientele changed, or do they have the same needs?
- Do I have new team members that do more or different things for my business?
- Has my business grown to a level that changes what I need?
Your answers will prompt you to look closely at replacing or eliminating expenses.
Return-on-investment (ROI) can feel a bit squishy. Let’s face it – when do we pause to quantify “Is there enough return yet?” Are there some expenses we simply skip for this question?
For Interior Designers, expenses linked to photography and digital graphics software are critical because new clients want to see your portfolio. Yet assigning dollar contributions to the profit/loss columns for these expenses may not be obvious.
So, the question is often about the level of investment – do you need the package add-ons? Is the 6-hour photo shoot required or would a 2-hour shoot be enough?
It’s easier to assess ROI for expenses like association or group membership fees. “Credibility-based” memberships may be obvious but decide if you’re spending money on groups that have minimal value to your business.
By the way, don’t skip the question. Even your mobile phone and website maintenance plans should be evaluated against, “Is this overkill?”
3. COSTS LESS
Every provider is vying for your business, so promises are being made left and right. Make sure you’re comparing apples to apples, avoiding locking in too long, and watching the fine print (e.g., this “introductory rate” that’s only good for 30 days).
Here are 2 favorites I like to highlight:
- You’ve outgrown your service – for example, your first automated email marketing tool likely limited the list size. Your mailing list grew, and the company added fees for extra addresses. That calls for right-sizing the service to save money.
- There’s a “bundle” with your name on it – as you started your business, you added online scheduling, project management software, social media management software, and more – one piece at a time. But now, bundles that include multiple services for one price cuts the expense by 50% or more.
You’ve gone through the first 3 questions and it’s time to scan your list of expenses one more time. Can you simply eliminate anything on the list – without harming your business?
Remember, you aren’t eliminating categories – just specific items that no longer serve your needs. For example, continue to pay for client gifts, but eliminate a subscription that no longer matches the frequency you send gifts to clients.
I answer these 4 questions twice a year (during budget season and 6 months into my fiscal year) and I want you to do the same. Conducting a Cost Audit requires you to make time to take a hard look at your numbers – it’s worth the time to create wealth!
If you’re experiencing rapid growth or want to chat about what’s happening with your growing numbers, schedule a Get to Know call here.