EV Tips 002: Manage Expenses
A couple months ago, I went to a seminar featuring Scott Morrison, CPA and Financial Partner of Morrison & Associates in Chandler, AZ. Scott made a great point, and one that I think it's easy for small companies to forget. As our businesses grow, it's easy to keep adding expenses like more equipment, more people, more bandwidth, and more administrative overhead. But as we grow our companies, taking on more expenses as well as more revenue, it's easy to lose track of the proportions and find that despite creating a larger company, profits can shrink. Many event video companies fall victim to this - what starts as a small 1-2 person operation can quickly fall apart without tightly managed expenses and very organized systems. Think of it as a wagon rolling down a steep hill. It works just fine if you don't plan to go anywhere.
Scott also said that during a slow year, if a business shrinks, it should be able to stay just as profitable as it was last time it was that small just by eliminating the expenses that it added as it grew.
After the seminar I took a thorough look at every dollar going out of my company (I can't recommend this strongly enough). What I found were three things: First, there were some expenses that we could just plain eliminate. Things like automatic domain renewals, unused email accounts, and equipment that never sees the light of day. A few calls to vendors and an hour on Craigslist and eBay freed up some monthly cash flow, and brought in some extra cash from things that we don't need. If you can't sell something, my advice is to throw it out or donate it. The less useless stuff you have surrounding you, the better your business will run. Next, there were some monthly plans that we were able to upgrade or bundle in order to avoid overage charges - phone systems are the best example of this one. Crazy how 900 minutes on one plan costs more than 1,200 minutes on the next plan up. Last, I called vendors and asked for better deals. In the last month, we've reduced the cost of our supplies, our credit card processing, equipment financing, and credit card interest rates... just by asking.
Moving forward, I plan to do this every couple of months. Why not?