By Sam Bowman.
If your business works with tight profit margins, you need to take advantage of tech and emergent tools that can increase the ROI of your investments while reducing your operating costs. Finding ways to bolster your profits is key, as a wider margin can help you budget for big-ticket purchases and will increase your operational agility.
Utilizing technology that optimizes your firm's operations can help you achieve your business goals beyond higher profits, too. For example, if a portion of your mission statement asserts that you wish to serve a social purpose, you can reinvest your dividends and revenue into community-oriented projects in your area.
You don’t necessarily need to change the way your firm runs to get more from your investments and cut down your costs, either. Sometimes, simple changes like investing in new inventory management tools can streamline your existing operations and make pre-existing policies that much more effective.
Tech to Reduce Costs
In an ideal world, your business would be able to turn the majority of its revenue into profits. In reality, your gross profit margin is likely dictated by factors beyond your control. For example, if you work in an industry like fashion, you’ll likely find that the cost of raw materials, labor, and shipping eats into your margins and reduces the amount you earn per sale.
However, working in an industry with tight profit margins doesn’t mean you should overlook tech that reduces costs altogether. Instead, you’ll want to research and implement technology that reduces costs, like:
- Automation: Are there any mundane, time-consuming tasks that could be easily automated in your firm? If so, utilize AI to complete your invoicing, email your customers, and properly tag projects. This will free up time for your employees and reduce your labor costs.
- Project Management Tools: Effective project management can help you cut costs and increase your operational efficiency. Empower your project managers today by using PM tools that allow for synchronous file sharing, real-time updates on projects, and effective task management.
- Accounting Tools: Digitized accounting tools can identify unnecessary costs and make financial data easier to work with. For example, AI-driven accounting tools can clean and aggregate your data far more quickly than human analysts.
- Supply Chain Management: Machine learning algorithms are changing the way supply chain management professionals approach their work. Today, you can use automated tools to flag potential issues, respond to market trends, and find new vendors who meet your brief.
- Customer Relationship Management (CRM) Software: Modern CRMs are powerful databases that can empower your customer service team and help you increase the lifetime value of your customers. An effective CRM can empower departments like marketing, too, as you’ll have a far better idea of who is buying your product.
These tools are all but essential in modern business. Software like accounting tools can help you quickly spot unnecessary costs and project management tools like workflow software will increase your workplace productivity. This can drastically reduce costs associated with labor and will help your team embrace a more effective, efficient approach to work.
Increasing Your ROI
Maximizing your business investments is absolutely vital to the long-term success of your firm. While every new asset you purchase may not produce the profits you were hoping for, most should have a high ROI that will generate plenty of revenue or significantly reduce your costs.
However, before you start making ethically dubious investments with promises of a high return, consider the ethics of responsible business investment. Balancing your head with your heart is crucial when purchasing new assets or building a business portfolio, as 77% of global investors say that responsible investing is more important today than it was three years ago.
Responsible investments can protect your long-term future, too. For example, choosing to buy equipment from suppliers who have a lower carbon footprint can meaningfully reduce your business-related emissions and help you avoid fines and legal fees in years to come.
Today, you can use technology to increase your long-term ROI and target responsible investments. Smart technology like IBM’s Emissions Manager and Microsoft’s Emissions Impact Dashboard can help you assess the sustainability of your partners and help you identify suppliers with an enviably low carbon footprint. This is key, as many modern consumers will want to know about your upstream emissions and may pivot towards competitors if you fail to disclose information about your supplier’s carbon emissions. By targeting responsible investments, you can increase your appeal amongst climate-conscious customers and may experience an increase in your long-term profitability.
This sentiment is echoed by data from the World Economic Forum, which shows that companies that invest in sustainable technology will be more profitable in years to come. This is highlighted by data that shows that more profit-oriented firms are investing in sustainable tech like sensors, data analytics, automation, and renewable energy.
Of course, working with sustainable partners and investing in responsible assets will likely require increased up-front costs. As such, your firm may want to consider exploring lines of credit for responsible business growth. Credit can offer flexible funding for your firm, but may negatively impact your credit score if you fail to repay on time. You’ll want to keep a close eye on interest rates, too, as taking out credit during times of market volatility may mean you pay more in the long term. That said, responsible loans can build your business credit score and may help your firm become more agile thanks to increased access to upfront funds.
Conclusion
Optimizing your business investments is crucial in today’s competitive world of commerce. Finding ways to cut down your costs and increase your margins can increase your firm’s agility and help you pivot toward more sustainable, responsible operations. Just be sure to leverage technology like emissions management software and CRMs, as these will meaningfully improve your efficiency and bolster your business’s profitability.
All posts are the opinion of the contributing author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CAIA Association or the author’s employer.
About the Author:
Sam Bowman is a writer from the Pacific Northwest, who enjoys utilizing the internet for community connections across the country. His writing reflects the many passions he has for the world around him. In his spare time, he likes running, reading, and frequenting the local bookstore.
