Operating expenses: How to Reduce Fixed Costs and Variable Costs Not Directly Involved in the Manufacture of Your Product or Service 

Exuberant operating expenses can put a substantial amount of strain and stress on a business’ bottom line. Finding ways to reduce fixed and variables costs can help to alleviate overhead and keep more money in the bank. Extra money in the bank means more money to put towards profiting. There are several options that can be explored in the journey to lessen costs. However, before making any drastic moves or cuts, it is important to know where money is currently being allocated.

By doing a little research and diving into a company’s income statement, one can identify the fixed and variable costs. Starting with fixed costs, go line by line and see where reductions can be made that do not sacrifice the quality of products or service. Then, move on to variable costs and make reasonable adjustments. Remember to focus on indirect costs. Though fixed and variable costs can vary between industries and from company to company, there are a few common costs that many businesses encounter.

A good place to start is the electricity bill. This can be as simple as being conscientious of energy being used on a daily basis. Brook Stahley of SunPower Corporation says that depending on the size of an organization, thousands of dollars can be saved each month by increasing energy efficiency. Stahley recommends the following:

  • Ordering an energy audit to see where you are using the most energy.
  • Turning off lights when they are not being used. Utilizing natural sunlight and installing long-lasting energy efficient bulbs. The United States Department of Energy recommends ENERGY STAR certified bulbs to save the most money and energy.
  • Installing motion detectors and automatic dimmers and using programmable thermostats to schedule heating and cooling that makes the most sense for the business but keeps things comfortable can also help. Keeping the office just one degree cooler during the winter and one degree warmer during the summer can reduce power usage by 10%.
  • Replace clunky, out-dated office equipment with newer energy efficient equipment. Be sure to understand the costs associated with new equipment and balance this against the savings.
  • Consider alternative and renewable energy sources. Keep energy-using equipment such as HVAC systems in good running condition. Something as simple as keeping vents clean can help avoid extra energy costs.

While we are on the subject of utilities, when looking at your water and sewage costs, be sure that you are aware of any leaky pipes or fixtures that could be using more water than intended. The Massachusetts Water Resources Authority demonstrates that replacing older toilets with low-flush toilets can cut the water quantities expended by anywhere from around 50% to nearly 80% per flush. For an organization with several toilets, this could mean tons of savings in the water usage department. Automatic sinks could also be an avenue to explore.

Speaking of savings in the bathroom, energy-efficient hand dryers can save money on paper towels in the restroom. Again, understanding where your usage sits, the costs of replacing existing fixtures, and the savings, in the long run, will help make these decisions. Cindy Quarters of Chron.com does address the fact that the initial cost of a hand dryer can be more expensive than buying paper towels, but the savings eventually surpass the cost of the equipment.

When looking at internet and phone costs, look to see if there are competitors that can offer the same or sometimes even better service for lower costs. Occasionally you can even negotiate with your current company to get a lower bill. Finding plans that combine the two services can also potentially save money. Be sure to take advantage of business plans as much as possible when they contribute to additional savings. Very small companies may be able to toss a traditional phone line and set up a free Google Voice line that forwards phone calls to existing lines.

Do not be afraid to look at your marketing budget and see where money can be saved that will not affect your sales. This is a delicate cost to adjust because marketing or advertising typically influence sales. Sitting down with your marketing team for a budget meeting to understand what works and what does not can make the decision much easier when figuring out what to cut. This may be a good time to meet with other departments, that do not directly work on the manufacturing of your product or service, to discuss their budgets as well.

Though negotiating insurance or rent payments may be difficult, it is certainly worth a shot to discuss with responsible parties. Researching more affordable insurance plans could allow for the discovery of lower premiums for the same coverage. Also, if moving to a more affordable location saves significant money, it is worth considering.

Reducing indirect fixed payroll costs in positions that do not directly involve your product or service is also an option, especially if there are areas of the business that can be automated, streamlined, or outsourced to save money. This requires more than a look at the income statement. An in-depth look at overall labor costs and operations would be necessary to make these decisions. However, for most companies, there are likely few to zero of these types of employees that are expendable.

Variable cost reduction could be a little bit trickier. The simplest way to reduce variable costs would be to decrease sales, however, that would not be very beneficial to revenue.

One area to look at is shipping materials or packaging costs. Shopping for more affordable shipping material could say several pennies or several dollars. Jane Porter, guest writer at Entrepreneur.com, suggests using packaging provided by carriers.

Credit card processing fees are a common variable cost for many businesses. Offering incentives for cash-paying customers can help lessen costs and may even increase customer satisfaction.

You can also examine what is being spent on office supplies and employee perks. Cutting waste or items such as printer paper and rubber bands or finding more affordable office supplies can help to save money. You can also consider offering incentives to employees who help reduce costs.

Indirect variable labor costs should be evaluated to see where there is waste. Paying two people for the job of one can really add up, and quickly. Unfortunately, sometimes positions need to be eliminated or hours need to be cut. One way to balance labor costs when sales fluctuate, for example, increased sales during holiday seasons, is to look at sales trends and determine if you need to hire a part-time worker versus a full-time worker or even seasonal and temporary workers. Again, these cuts would need to exist in departments that do not directly affect the manufacturing of your product or service. For instance, an office assistant.

Business owners should also be aware that there are grants, subsidies, and government assistance programs that help businesses to become more efficient and save money, especially when it comes to going green, helping the environment, and reducing energy usage. These types of changes also help to make a company more environmentally responsible, which is a plus in the eyes of many employees, customers, and vendors.

Though it takes time and research, looking into cutting indirect fixed and variable costs can greatly save companies money both in the immediate and in the future. The changes made may take some time to get used to, but the reward will be satisfying and highly visible in both your financial reports and your wallet.

A Non-Exhaustive List of Resources:

For more information on energy tax credits, rebates, and savings visit https://www.energy.gov/savings/search. Energy.gov is a great resource for the energy conscious entrepreneur.

The SBA also provides information on state and local energy efficiency programs at https://www.sba.gov/content/state-and-local-energy-efficiency-programs.

Code Green is an organization that helps organizations be more sustainable and go green, they also offer rewards and incentives. More info can be located at https://www.codegreensolutions.com/.

Find information about government grants from the US Department of Agriculture relating to sustainability at https://www.grants.gov/learn-grants/grant-making-agencies/department-of-agriculture.html.

References

Authority, M. W. (2014, March 8). Water-Efficient Toilets. Retrieved from MWRA Online: http://www.mwra.com/comsupport/conservation/toilets.htm

Kokemuller, N. (2016, July 6). Examples of Variable Costs for a Business. Retrieved from bizfluent: https://bizfluent.com/list-6500118-examples-variable-costs-business.html

Lighting Choices to Save You Money. (n.d.). Retrieved from US Department of Energy: https://www.energy.gov/energysaver/save-electricity-and-fuel/lighting-choices-save-you-money

Lohrey, J. (n.d.). Are Advertising and Marketing Expenses Fixed or Variable? Retrieved from Chron: https://smallbusiness.chron.com/advertising-marketing-expenses-fixed-variable-80341.html

Porter, J. (2012, October 17). 10 Ways to Trim Shipping Costs. Retrieved from Entrepreneur: https://www.entrepreneur.com/article/224619

Quarters, C. (n.d.). Cost Benefit of Paper Towels Vs. Hand Dryers. Retrieved from Chron Small Business: https://smallbusiness.chron.com/cost-benefit-paper-towels-vs-hand-dryers-41923.html

Spielman, E. (2018, February 09). Direct Costs vs. Indirect Costs: Understanding Each. Retrieved from Business News Daily: https://www.businessnewsdaily.com/5498-direct-costs-indirect-costs.html

Stahley, B. (2017, February 21). 10 simple ways to reduce business energy costs. Retrieved from SunPower Business Feed: http://businessfeed.sunpower.com/lists/10-simple-ways-to-reduce-business-energy-costs

Sullivan, M. (n.d.). 8 Ways to Reduce Operating Costs. Retrieved from QuickBooks: https://quickbooks.intuit.com/r/expenses/8-ways-reduce-operating-costs/

The business case for energy efficiency investments in buildings and plants. (n.d.). Retrieved from Energy Star: https://www.energystar.gov/buildings/reference/business-case

 

 

 

 

 

 

 

 

The Guided Entrepreneur: Crowdfunding on Indiegogo

If you hear the term crowdfunding, then sites like Kickstarter or GoFundMe likely come to mind. However, there is another big contender that has made quite a name for itself and for those who have found success in using it. Indiegogo is a crowdfunding platform launched in 2008 that provides a space for innovators and entrepreneurs to join forces with backers and supporters to present communities big and small, on a local or global scale, with thoughtful ideas, products, and causes. The platform aids campaigners, from concept to marketplace. Indiegogo has quite the reputable resume and has helped many reach the financial goals necessary to bring their business plans to life.

What does Indiegogo allow?

According to Indiegogo the following is allowed on their platform:

  • For-profit campaigns
  • Campaigns benefiting nonprofit organizations or nonprofit beneficiaries
  • Campaign for products
  • Anything classified as a “community project” that is not a personal cause
  • Educational campaigns in the tech and innovation category

For those campaigns that do not qualify for Indiegogo, they refer you to GoFundMe. These campaigns included community-based fundraisers that are for personal causes, medical/funeral/memorial/emergency fundraisers, and any other personal fundraisers that fall under other categories.

Success Rate

Indiegogo has distributed more than $1 million in funding to campaigners. Over 3,000 people have used the platform for benefits and support. Over the past two years, Indiegogo has helped over 130 campaigners launch into major retailers via their partners. The platform has been used to start campaigns in over 220 countries and territories. Touting big numbers, the site has over 10 million people that visit each month. Of the campaigns that reach and exceed their goal, nearly half are run by women. Each month about 19,000 campaigns are launched on Indiegogo.

Fees

Indiegogo is free to use when launching a campaign. When it comes to crowdfunding, the platform keeps 5% and charges 3% plus $0.30 in third-party credit card fees. For campaigns that do not reach their goals, a 9% fee is implemented.

Funds Delivery

Campaigners can choose between fixed funding and flexible funding. Fixed funding says that all funds are returned to supporter and backers if the total goal for the campaign is not met. Flexible funding allows the campaigner to keep the funds even if the goal is not met. Funds will be delivered within 15 business days of the campaign ending so long as all requirements have been met and the campaigner has provided the correct information necessary for the transfer. Indiegogo will only send money if it is over 100 in the campaigner’s currency.

Reporting Requirements

Indiegogo will send a 1099-K form to the person responsible for receiving the campaign funds if the campaign qualifies for the Form 1099-K. The US Government does require individuals and businesses to reports received from crowdfunding. To qualify, the campaign must have raised over $20,000 or had over 200 contributions. A W-9 that includes name, address and Tax Identification Number must be provided to receive a 1099-K.

References

How It Works. (n.d.). Retrieved from Indiegogo: https://entrepreneur.indiegogo.com/how-it-works/

Is My Campaign Allowed on Indiegogo? (n.d.). Retrieved from Indiegogo: https://support.indiegogo.com/hc/en-us/articles/360000574528-Is-My-Campaign-Allowed-on-Indiegogo-

Will I Receive a Tax Form. (n.d.). Retrieved from Indiegogo: https://support.indiegogo.com/hc/en-us/articles/204738008-Will-I-Receive-a-Tax-Form-

 

 

Professional Presentation ENT 645

I gave an inspirational and motivational presentation on, Sunday, August 1, 2018 at 7:30 EST. In the days and weeks leading up to my chat I racked my brain endlessly trying to decide what I was an “expert” in and could talk about via a Facebook LIVE chat/talk. I ultimately decided that I would talk about what I know and can talk about freely and excitedly. As an entrepreneur, I know how much courage, hard work, dedication, drive, and support it takes to be self-motivated and work hard on a dream and on a business. I talked to my audience of around 20 attendees about following their passions, using the resources at hand, and finding others that inspire and support them. I told my story in hope that someone could relate to the fact that things do not always turn out exactly how we plan but that if we keep pushing, they’ll turn out exactly how they are meant to be. The responses were positive, and though I was nervous during the presentation, seeing that everyone was so supportive and receptive really gave me a boost of confidence and it felt amazing. I learned a ton from this experience and hope to do more public speaking in the future. Those who watch cheered me on in the comments, told me how proud they were, and more. I even got a few texts from some supporters who thoroughly enjoyed my talk. You can few the talk below.

Regina Nicole Boutique-How To Get First Dibs & Great Deals on New Boutique Fashion That Fits & Won’t Hurt Your Wallet! Direct Response Tool and Analysis

Click here to go to form at www.shopreginanicole.com

Direct Response Tool Analysis

In creating a “two-step” direct response marketing tool for Regina Nicole Boutique, I found that the most difficult task was deciding what I could offer of value to consumers. I determined that offering entry into our exclusive VIP Shopping Group would be the best route to take. Our group currently consists of over 600 members but growing the group will only allow us the opportunity to be in front of the eyes of new potential customers. The group operates as a small community of mostly women. We post great deals, funny graphics, inspirational quotes, and more. To be a member you have to be invited to the group by an existing member, so it really limits our visibility. I knew that offering a way into the group that does not require knowing someone within would allow for increased and valuable reach.

Creating the tool was very straight forward. I used JotForm to create a form with a headline, a picture, a little info about the boutique and what the group offers member. The form asks for the client’s name, email address, birthday, phone number (optional) and feedback on what they value or would value receiving from us. I also included in the form a note that informs applicants that by filling out the form, they are also signing up for our email list, which is why they are asked for their email address.

Email acquisition is very important to us as we really are looking to beef up our email campaigning. Our current conversion rates are low, but our open-rates are slightly above industry averages, so there is great potential in that avenue.

The birth date, we can use to surprise and delight our customers with a special offer just for them, just for their birthday. The feedback is great because it allows current and potential customers the chance to tell us what they want from us, and existing customers can give us quick feedback on what they think about what we are already doing. I edited the form several times before I got it where I wanted it both in aesthetics and functionality. I was sure to include branding, including our logo, voice and terminology. I also included a real review from one of our customers.

The form breaks down as follows:

Starting with the catchy headline.

How To Get First Dibs & Great Deals on New Boutique Fashion That Fits & Won’t Hurt Your Wallet!

Followed by a subheading. Briefly describing the offering.

CONNECT WITH REGINA NICOLE BOUTIQUE TO GET YOUR INVITE AND GAIN FREE EXCLUSIVE VIP ACCESS TO SPECIAL OFFERS, DISCOUNTS, GIVEAWAYS, AND PROMOTIONS.

Then I addressed the customer in a small body by saying…

Hey There Beautiful,

We want to give you free access to our exclusive VIP Shopping Group. You’ll find fashion tips, inspiration, motivation, and best of all member-only discounts, giveaways, and promotions. Regina Nicole Boutique features hand-picked boutique fashion at affordable prices in a wide range of sizes for all women. We break the mold when it comes to the boutique world. Fill out the form below to be added to our email list and gain access to our VIP Shopping Group. You won’t want to miss the fun!

Love,

Regina Nicole

Next I inserted the attractive graphic we use in the group pinned post.

That is followed by the form requests for information.

And then I added some pertinent info or “small print”.

By completing this form you are also subscribing to our email list. Don’t worry we only send good things!

You will be redirected to the VIP Shopping Group on Facebook where you can request to join!

Lastly, the submit button and a review from one of our customers.

The form then directs the applicant to our Facebook Group where they can simply hit “Request to Join”. We then approve or deny all requests within 24 hours.

Before evaluating my direct response tool, I wanted to see how my ideal clients received the marketing piece as well as understand the results.

The feedback both on the form and from those I sent the link to was very positive and customers were receptive. I even had a few people share it with their friends. The only negative I received was the page is not secure and therefore information entered in could potentially be compromised. This individual did not fill the form out for this reason. That is something that I am trying to remedy.

At the time of this blog post being written, we had received 9 responses. I really want to find more ways to put this tool to use and see more responses. When thinking of ways to really expand the reach for this form, I think paid advertising on social media could be a great start. I also think that taking a tablet to our next event could also work to go along with our email acquisition efforts.

We will certainly be using this concept as well as this particular form to continue to gain leads. This is a much less evasive way to really gain some important information and hopefully create new customers by creating value.

 

 

 

Positioning Grid

The positioning of your business demonstrates where you stand in comparison to your competitors. A positioning grid helps to create a visual tool which assists us in seeing where we can improve to better align or outrank our competitors in the aspects that really count.

I chose to focus on two major components, price and variety/selection. Price is important to customers when it comes to their first impression. In the clothing industry, sticker shock can prevent a customer from further browsing your selection. In our current market-space, our ideal client is not attracted to flashy and expensive pieces. This is a constant frustration for shoppers who want to shop in local boutiques but do not have a large budget. As consumers within this market, we knew what was missing and what we want to provide to create a solution to this frustration.

We realize as a new business that our variety and selection is slightly lacking in comparison to our competitors. However, we have made sure that what we do carry is broad in sizing. We carry a wide range of sizes something that is also often lacking in many boutiques.

To begin my research, I reached out to existing and potential customers in our “Regina Nicole Boutique VIP Shopping Group” on Facebook. This group consists of around 600 interested consumers who have either bought from our business or has engaged with us about the  products we carry. I had them complete a poll, there were about 20 or so participants. This was really just a way for me to get a good idea of how our ideal client perceives us in comparison to our competitors. The results show that the majority of our sample find us to be as or more affordable than our competitors. It also heavily indicated that we offer less variety and selection of products than our immediate competitors. There were no votes that showed that we are perceived as more expensive than competitors.

The next step I took was to reach out to some women in our ideal client category and have them rank Regina Nicole Boutique in comparison to immediate competitors based on price and selection/variety. It should be noted that as an existing business, we also gain a good bit of insight from our customers when they come into the store to shop. Customers will often make comments such as, “Wow, your prices are affordable for the quality.” or “Your prices are much less than __________.” or even “I think you all will do well if you get more selection.” As involved and visible owners we are directly getting this feedback from customers and can see their level of appreciation for our pricing.

By reaching out to clients and researching, it was reiterated to us that we really need to up our selection of products to really compete. We knew going in that our store is small and one of our goals is to grow, but it just became blatantly obvious that when it comes to selection we fall below the competition. I really saw this in the ranking lists that I received back. Every one of our immediate competitors has a wider range of offerings than we can provide at this time. When you look at our competition though, only one other women’s boutique exists in our area. This particular boutique is longstanding and has a large variety, however, we strive to differentiate ourselves in other ways. Our other two immediate competitors are a general store (these types of stores sell boutique brands) and a department store (which contains several departments, some of which we are not aiming to provide).

Though, some data we were already privy to, I can appreciate the honest feedback, tips, and advice we received from customers because of this research.

It is obvious that we compete well on price but our variety puts us at a slight disadvantage. So, this brings to question, in what other ways can we differentiate ourselves? For one, we must have the understanding that we are not just selling clothes. We strive to get to know and remember our customers, and provide a welcoming ambience and comfortable environment. We also offer a wide size variety that is not common in the boutique industry. We are selling confidence, friendship, and influence. Since we can provide a level of service and an experience that our customers can value and are unable to receive at, say a department store where things are a lot less intimate, we can sell our products at a premium price. While we compete well on price we are not the cheapest clothing option if customers were to break out of our immediate market. Our customers are willing to pay these prices because they can shop local, feel the pieces, try them on, and take them home that day. They get the full shopping experience and leave feeling great about their purchases and the service received.

We make ourselves and our brand visible to our customers in a variety of ways and we are looking to expand this area and our brand visibility.

Current Points of Contact and Visibility

  • Email (four different email addresses)
  • Facebook Page
  • Facebook Group
  • Owner’s personal Facebook profiles
  • Phone
  • In-person/Storefront
  • Newspaper (rare)
  • Instagram
  • Website

Future Points of Contact and Visibility

  • Billboards
  • Radio Ads
  • Direct Marketing
  • Community Involvement

We also use a variety of material and mediums to communicate our competitive advantage to our clients:

Materials and Messages

  • Name and Logo
  • Email Newsletters
  • Facebook Page
  • Facebook Group
  • Instagram
  • Social Media Advertising
  • Radio
  • Billboards
  • Networking Events and Opportunities
  • Customer Service
  • Direct Mail
  • Business Cards
  • Employee Attitudes
  • Signage
  • Our Story, Mission, Values, Vision
  • Owner Visibility
  • Vendor Events
  • Website
  • Smells, Sights, Ambience, Environment
  • Attire
  • Invoices
  • Presentation of Products/Merchandising
  • Package Branding for both In-store and Shipments

Our positioning statement is very unique and further demonstrates what sets us apart from the competition.

For the average women 25-34 looking to feel stylish and comfortable no matter her size or budget.

Regina Nicole Boutique is the affordable local boutique that helps inspire confidence and encourage a sense of empowerment and community to the local women of Jackson County, North Carolina.

We go out of our way to handpick quality pieces from brands that provide a full range of sizes. We keep our pricing reasonable and our styles fresh.

We are a woman-owned boutique striving to make the average woman feel more than average.

In conclusion, we have gained much insight from looking at our positioning in the local boutique market. We know where we stand and can work to grow in the areas that we need to. I am interested in seeing what this positioning grid will look like in a year’s time.

Angel Investors from the Entrepreneur’s Eye: Harvesting

This post concludes my series of blogs on my reading, Winning Angels: The Seven Fundamentals of Early-stage Investing by David Amis and Howard Stevenson. Which brings us to the last and final fundamental of early-stage investing, harvesting.

For angel investors, the harvest is essentially the exit.

When I sat down to write this blog, I was not really sure which way I wanted to take it. Per usual I really want you as the current or future entrepreneur to understand how to look at this fundamental in a way that benefits you.

In my external reading I found an article by Venture Giants (VG) that posed a great question. “What would be your answer if an Angel Investor asked you how he/she could exit from your business angel investment in the future?

VG suggests that you should already know the answer to this question before you even throw your elevator pitch at a potential angel investor. I agree. How an angel investor is going to exit can affect the entire deal.­ Think about it, if this fundamental is part of the reading for angel investors, then it is understandable that they would want to know how it is all going to play out for them in the end…from the beginning. They will expect to see an exit strategy according to VG. You as an entrepreneur should also have a fine understanding of harvesting and the exit from where you stand and be sure that you and the angel investor are on the same page.

Angel investors will not only want to know the how of the exit, but also the when, the how long. You should also have a good idea of what your growth potential and plans are when you are calculating the “how long”.

There are several different exit opportunities that you can offer to your angel investor. Will you want to sell your company? Perhaps a partial sale. There is also the option of an initial public offering or IPO or stock where you would take your business public, to name just a few. There are also negative harvests and exits, such as a bankruptcy or what Amis and Stevenson refer to as, total annihilation. I think it is very important for entrepreneurs to understand the many different outcomes and possibilities before they even have an initial meeting with an angel investor. Knowledge and education is key and it is pertinent that you are realistic in what the future could be by doing all of your research, getting the numbers, and really having a road map of what your venture looks likes from every single angle.

I would recommend looking into Venture Giants article as there are some great links to other articles that will help you to craft an elevator pitch as well as provide info on looking at your growth strategy and expansion.

Amis, D., & Stevenson, H. (2001). Winning Angels: The Seven Fundamental of Early-stage Investing. Pearson Education Limited.

What is your proposed Exit Strategy for an Angel Investor? (n.d.). Retrieved from Venture Giants: https://www.venturegiants.com/news-channel-344-what-is-your-proposed-exit-strategy-for-an-angel-investor.aspx