Practicing Business Strategies: Reducing Expenses

Anyone running a business seeks to run it with as much efficiency as possible, while still being able to maximize profits and to satisfy customers. My college course classes for the Business Management minor has taught me many ways to streamline a business and to make it more profitable.

In my situation, the one thing I can do to make a drastic change in the way I spend money to make money. Reducing expenses is a common business practice but it is very efficient way of making a larger profit.

HOW I'M DOING IT

The PSP mod kits that I sell consist of a battery and a memory stick. The cost of the battery is already very cheap ($25) and I cannot find a better alternative. As for the memory stick, I've been purchasing 512mb memory sticks for $7.99 each. After some thorough research, I've found that 256mb memory sticks could be used and they were available in a store for only $4.99 each.

Next, I've given a detailed look at the listing fees on Amazon.com. Apparently, I've been selling in the wrong category, which charges 15% commission while the mroe appropriate category charges only 8% commission. That is almost HALF and that's a BIG difference!

Finally, I'll be reducing the cost of shipping. Firstly, I'm using USPS Priority Mail with delivery confirmation. The shipping boxes, I order online so they're free. I typically make the effort to trek to the post office and pay for postage there. After looking around USPS.com, online postage is cheaper and tracking is free. So now, I'll be paying for and printing postage labels at home. It saves money and I can just drop off the packages without waiting on line, thus also saving me time.

THE RESULTS

The total cost of goods, including taxes and shipping fees, was originally $40.55 for a profit of $13.15 per unit. A reduction in expenses would yield a cost of goods of $36.60 for a profit of $17.10. Decreasing expenses by about 10% will increase profits by 30%. A few dollars and cents may not seem like much but as multiple units are sold, there is a big difference in profits.