Taking Control of Your Business’ Profitiability

Business Profitability

The reason why many businesses don’t go past the starting stage is because they do not know how to make profits without having to increase costs. In fact, once you have realized that every aspect of your business is doing well yet you cannot seem to make profit, you should place a very big question mark on your expenses. You need to start cutting on costs so you can realize an improvement in your profits. 

Every business basically has two types of costs that it needs to work on. There is fixed costs and then there is variable costs. Labor is one of those costs in your company that can fall into both fixed and variable costs. This is all dependent on whether you decide to employ or outsource. 

Sometimes, holding employees full time can be a waste of money. This is because, even when they are not working, they still need to get paid. Therefore, you need to look at how regularly you use their service. If they only play a role in your company a few times a year, then it might be time you thought of laying off and finding alternatives.

There are two alternatives to full time employment, that is, contracting and outsourcing; contracting allows you to benefit from expertise of the contractor for an agreed period of time. After the completion of their signed project, you do not have to continue paying the contractor. This is a great strategy for increasing profitability. Particularly, for services that you only need once. Contractors are also beneficial if you want to avoid holding employees, yet the project being handled is highly sensitive.

On the other hand, outsourcing is a great way of saving on costs for projects that are ongoing, but in fragments. They, particularly, help you save on business costs if you are handling a project that is not complex. That is to mean, projects where communication is not vital. In this case, the location of the outsourced party does not even matter. As long as the project is not sensitive, updates on the project can always be made via phone or email.

Outsourcing is superior to both employment and contracting. This is because, a contractor works on a one-time project, hence they might not be motivated to deliver excellence. And, as for employees, it is hard to lay them off even if they are not delivering. But, as for an outsourced service, they will tend to deliver quality so that they can be chosen for the next fragment of the project. 

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Comments (4)

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    Dmytryk paulk

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    My small business has really taken a huge leap since I began reading your blog great ideas and methods for success. I also do tons of out sourcing with my company projects.

    Reply

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    Pristine Tompkin

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    Starting a business is a pretty hard thing to do. It costs so much money to invest in something that you do not know whether it will be a success or not. You have to be really dedicated to starting up a business.

    Reply

  • Avatar

    Micki

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    I agree. Outsourcing offers access to skilled workers on an as needed basis. It is certainly more cost effective for small businesses.

    Reply

  • Avatar

    Dan

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    “That was a great article! I really learned about Taking control of your business’ profitability.”

    Reply

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