Few business owners consider the effects of shipping costs on their business. Taking them into account can help you better manage your budget, here's how.
With increased fossil fuel costs, the cost of shipping going up is something your business can count on. However, have you given any thought to just how significant the costs can be? The costs of shipping can have a significant impact on your business and its bottom line.
The main way shipping costs impact your business is by eating up your profits. It’s a common rookie mistake to not accurately figure in the cost of shipping, packaging and handling for your business. Remember the cost of shipping is just what you pay the post office, UPS, FedEx or whatever carrier you choose. It’s also the cost of packaging, as well as the time you put into packing up goods and preparing them for delivery. All of this must be taken into account when figuring shipping charges for your customers. To do otherwise is to cheat your business... and yourself.
Of course, you have to pay yourself for everything associated with shipping. Your competitors, however, might take a loss on some aspects of shipping in an attempt to make their products appear cheaper. What to do in this situation can be a tough decision to make. The point being: Someone is eventually paying for shipping. You either pass the costs you lay out along to your customers or you eat them for the sake of looking like your product actually costs less.
Cash Flow Problems
If you fail to accurately tabulate the total cost of shipping, you are going to have cash flow problems. Even if you are a little bit off the costs will add up over time. Soon you will be facing cash shortage. For a small business this is no abstract matter. It can literally mean the difference between your business getting essential items that it needs or failing to do so at great detriment to the business.
Cost of Your Goods
Remember that paying for shipping isn’t a one-way street. You also have to pay for shipping in the form of the goods you purchase from your distributors. As shipping costs increase, so do your operating costs and not just those directly related to shipping. No matter what business you are in, if you deal in physical goods that must be shipped, the rising cost of shipping is something to keep a watchful eye on.
Saving on Shipping
You can save on shipping without short changing yourself.
- Use a drop shipping company. This cuts out the middle step of sending goods to you and ships them directly to your customers from the wholesaler.
- Shop around for different shipping services. See which one gives you the most bang for your buck.
- See if you can negotiate bulk shipping rates with the company who delivers your goods. It’s not unheard of for a company to provide you with a discount for bulk business, even in the realm of shipping.
- Don’t use expensive shipping options like express shipping. Provide these to your customers only at an additional fee.
- Make one day shipping day. This consolidates the amount of time you spend on shipping, saving you money.
Don’t Short Change Yourself
Calculate the real costs of shipping to your business. Then integrate them into your overall business and financial plan. To not do otherwise is to allow a slow leak of money. While larger businesses might be able to afford this, your small business cannot.