Corporate profits are near an all-time high. So why are so many small businesses feeling the squeeze?
Just as ultra-wealthy Americans enjoy a slew of tax benefits and other financial advantages that simply aren’t available to working stiffs, big corporations are the beneficiaries of a system set up for their direct benefit.
That doesn’t mean small businesses need to turn their backs on the consumers who depend on them. Under the right circumstances, small businesses can and do grow into big businesses, if they so choose. They just need to know how to play the game on the big guys’ terms.
If you’re the proprietor of a small or midsize business looking to punch above its weight, you’d do well to cop a page or two from your larger competitors’ playbooks. For businesses large and small, these five strategies point the way to higher profits and stronger finances — and every day you’re not employing them is a day you’re losing to your more proactive peers.
- Better Bargaining
Everything is negotiable.
Well, almost everything. Depending on the circumstances, there’s a limit to what’s possible, practical, or polite to negotiate.
Whenever you’re not bound by logistical or normative constraints on your ability to bargain, it goes without saying that you should not accept the first offer. Nor should you accept pricing through ambivalence or indifference: whenever a vendor or employee contract expires, you had better be driving hard to get the best possible on the renewal.
Just remember: your negotiating partners want your business. That’s not to say they won’t walk away if you insult them — just that their capacity to turn the other cheek is greater than you might think.
- Lean Six Sigma (Or Your Preferred Process Efficiency Method)
Think your operation is already as efficient as can be? Think again. There’s almost certainly more that you can do to cut costs and improve outcomes throughout the production process.
If you’ve already plucked all the low-hanging fruit, no problem. Just call in the professionals. Process efficiency systems like Lean Six Sigma are built to reduce waste and tighten processes beyond the limits of what appears to be possible. Start by bringing in LSS-trained consultants to streamline discrete projects, then invest in LSS training for as many key managerial employees as possible.
- Judicious Use of Debt
When used properly, debt can actually be a powerful accelerator for ambitious small businesses. A business credit card is a great way to finance big purchases over time without draining your cash supply or negatively impacting your cash flow, for instance.
But overuse of debt is a surefire way to get into trouble. Over time, interest charges can cripple low-margin companies. If you can bootstrap, do.
- Employee Buy-in
Engaged employees are productive employees. Disenchanted employees, not so much. For small business owners watching their bottom lines like so many hawks, the trick lies in convincing employees to work harder without paying them more than they’re worth: increasing project autonomy, increasing time off and vacation allowances, instituting flexible worktime policies, and creating new opportunities for employees to influence top-down decision-making.
- Tax Efficiency
If you don’t have a tax attorney or CPA on your most frequent contacts list, put one there. The U.S. tax code is formidable, and you simply don’t have the time or expertise to parse every relevant section. Don’t be scared of the three-figure hourly fees these pros charge: used properly, they pay for themselves.
What are you doing to boost your company’s profitability?