Our new SSE Australia Chief Executive Celia Hodson shares her top tips on how to improve your venture’s margins.
When faced with the bigger issues concerned with running your social enterprise or venture, it can be easy to neglect the little things. However, a leaner, more profitable venture can result from making a few simple adjustments to even the most minor areas of your operation. So, where can you improve those all important margins that could make you sustainable?
1. I start with the easy stuff first…..assess your monthly income and expenditure. Compare figures with previous months, as well as targets set out within your business plan. This will tell you whether margins are improving or decreasing, enabling you to set targets for the margin-boosting measures you introduce.
2. Think about Full Cost Recovery. Complete a full audit of your outgoings. Include everything from wages (including overtime) and supplier costs to utility bills, insurance payments, fuel expenditure and public transport costs, etc. It’s just the same as managing your household income really. Highlight areas where you think you can make cutbacks without these having an adverse effect on your social impact. But please be realistic – don’t expect to reduce costs across the board.
3. Next take a closer look at the amount of waste (in it’s wider sense) your enterprise generates. Many social enterprise can make considerable savings by taking simple steps to reduce waste or duplication. Encourage your team to use all of your resources as efficiently as possible. Ask them to treat these with the same diligence they would their home budgets or belongings.
4. Ever asked for Mates Rates? If you don’t ask you don’t get so try to negotiate better deals from your existing suppliers. Inertia on your part can lead to you paying over the odds just because you haven’t had the time to check. Ask whether they will grant reductions for your early payment. It is quite usual to receive an early payment discount of a couple of %.
5. Don’t rule out trying to get improved prices from new suppliers — providing you’re sure you’ll receive the same quality products or services.
6. If you have the space consider whether buying in bulk could improve margins. Agreeing long-term supply contracts or minimum annual purchase volumes in return for lower prices could be another cost-saving strategy, but you need to make sure this will not overstretch your finances or leave you holding supplies you don’t need so think carefully on this one.
7. Is it time you reconsidered your product or service range? If you don’t think you can attract more customers with your existing offer — maybe you should consider adding to your portfolio or adding value to an existing product or service.
8. Review your prices and cost of service regularly. As well as identifying increases in your costs, you need to keep up to speed with how much your competitors charge as well as how much customers are willing to pay. If you are confident it will not affect sales volume or contracts secured, you should always keep your prices as high as you can.
9. Focus your efforts on high-value opportunities and minimise the time you devote to those that offer the least or take up more time than they are worth. Consider how many hours it costs you to draft a bid for a relatively small grant and keep your eye open to excessive monitoring and evaluation requirements.
10. If you employ business development or fundraising staff, maybe it’s time to reconsider their targets. You could consider offering or improving their bonus, commission payments and other incentives, too.