I worked in retail for several years and heard the words "bottom line" a lot. It came down to watching the amount of paper towel each store used, taking inventory before ordering more supplies and cutting back on staff for slower days. Little things like ordering more pens when there's a box hidden behind the paper, would slowly chip away at a store's profit for the month. Whether you're a large company or a start up, it's important to understand what your bottom line is and how to protect it.
Bottom line is defined as:
The last line of a financial statement, used for showing net profit or loss.
But it also refers to any action that may increase or decrease a company's overall profit - this is the area we're interested in and how to improve your bottom line by cutting costs and working more efficiently.
Tax Write Offs
Find out what you can and cannot write off with your business. The more you can find to write off, the less your taxable income will be...which means less money you have to pay to the government. Consider all the things you do and use that are related to your day to day work and keep receipts from things like; coffee with a client, car mileage, office supplies, telephone and internet services, etc. These may seem like small expenses but they add up over the course of a year.*talk to an accountant to find out which expenses you are eligible to write off
Take into consideration ALL of the expenses you have to run your business and how you are going to cover them. Again, these costs may seem small but will quickly add up. For example: the price you pay for each tag you put on your items might be pennies but add that to any printing or stickers you need for the tag, the tag attaching gun you had to buy, that gun's needles and fastener refills, your time to attach each tag, etc and that tagging process starts to become costly.
You'll also want to think about:
- packaging (ie: boxes, ties, shopping bags for craft shows)
- shipping costs
- tools & maintenance of tools
- marketing (ie: business cards, postcards, advertising, website fees, etc)
- ALL of your time. Not only the time it takes to make the item but consider the time it took you to source the material, photograph the item, list it online, etc. Think of it this way: if you were hired by a large company to do this job, would you do any of this for free? If your goal is to run a profitable business, make sure you pay yourself for this time.
Once you have all of your costs accounted for, decide on how you're going to cover them so they don't come out of your pockets. Either increase your profits by increasing the price of each product or selling more products each month.
Save Time & Money
Think of all ways you can reduce your costs either through discounts or working more efficiently. Instead of buying materials as you go, can you buy them all in bulk at the beginning of each quarter to get a significant discount from your supplier? Shop around to see if you can get better prices and watch for sales in all areas of your business.
When it comes to your time, how can make your process quicker? I'm personally guilty of getting distracted by my email accounts and have become more efficient by setting time aside morning and afternoon to check and reply to emails. Perhaps your business could benefit from something like this or creating an assembly line to speed up production. You'd be surprised at how much time you can shave off your labor when you do all your cutting at once, all your sewing at once and all your finishing details at once.
Take a look at your bottom line and see if you can make improvements to it. You don't want to take the fun out of your craft but it's important to keep these things in mind if you want to stay profitable and grow.