Five Ways to Reduce Business Expenses for Your Kona Business

Small business success in Kona, Hawaii is often a matter of shifting percentages. If your Kona business is bringing in $300,000/year and your expenses are 80%, you’ll have $60,000 left for your efforts. Now, imagine cutting your expenses 10% (to 72%): you‘ll see an extra $24,000 a year in your pocket, which will raise your profits by 40%.

How could a small business in Kona, Hawaii save $24,000/year on $300,000 revenue?

Aggressively track expenses to maximize deductions. Track mileage using software like MileIQ or just keep a notebook in your vehicle. This can save you thousands every year. If you donate money or supplies to non-profits, c heck to see how you can deduct those items.  Remember, you don’t need to give any extra money to Uncle Sam; tax evasion is illegal, but tax avoidance is smart!  Possible savings: $2-5,000.

Take your bookkeeping in-house. For many small businesses that I know if Kona, bookkeeping and payroll fees are often upwards of $10,000 a year. Programs like Quickbooks can help you manage these tasks with much less effort than ever before. Possible savings: $4-$10,000.

Look carefully at how you can reduce costs with your supplies. At Kona Impact, we used to use a just-in-time system for ordering our printing materials. This kept our inventory costs low—a good thing—but we paid for it dearly in FedEx costs. We now are willing to tolerate higher levels of inventory if we can buy a palette of materials and save greatly on shipping. Consider buying paper in bulk at Costco and find ways to buy in bulk to reduce unit costs. Possible savings: $1-$10,000.

Kona business expenses

Focus on reducing at office expenses. Hawaii’s electric costs are 2-3 times those of the Mainland, so consider turning off office equipment at night and on weekends. Put your water dispenser on a timer.  Turn on the air conditioner for later in the morning and turn it off earlier in the afternoon. Consider room/zone air conditioners. Use natural light to reduce electricity costs. Consider changing to LED lighting. Water delivery is about $8/gallon, $832/year for two containers a week. The water dispenser in Wal-Mart charges $1.25 for five gallons, $130/year, and it’s the same water you’d get from a delivery service. Call your internet and phone providers; chances are there are plans available now that offer better products and less costs. Possible savings for your Kona business: $1-$5,000.

Have the right people do the right jobs. All employees don’t have the same skill sets and costs. Consider hiring a young, low cost employee for the some of the manual labor or small tasks. Many small business owners have a hard time delegating and letting low-cost workers do low-margin work. As a result, they end of doing a lot of tasks that add very little to the business’ profitability. Possible savings: A lot!

Just for the sake of comparison, if you increase your sales 10% for your Kona business, you will only see $6,000 in extra in your pocket ($300,000 x 10% = $30,000 additional revenue – 80% costs = +$6,000). Compare that to the $24,000 if you can lower your expense 10%! All things being equal, cutting expenses and maintaining revenue will have a greater impact on your financial success. The best outcome, of course, is to grow revenue and cut expenses!