Controlling costs is a challenge for all contract programs. The more costs can be controlled, the stronger the bottomline will be. The following are five techniques for controlling costs.
- Work hard on negotiating for reduced production costs. You are looking to not have your production costs exceed 40-45% of your income. To do this, you must work hard to get the lowest costs you can from instructors and from those from whom you buy materials. If you need to rent space, then that, too, is a concern. When you price, make sure you know what your production costs are. This will be explained in more detail in the pricing section.
- Keep administrative costs in line. Your administrative costs should not exceed 35% of your income. To do this, you must make sure you are not overpaying for staff as a percentage of income. In the team selling section, the amount you should spend will be explained.
- Do not do wasted promotions. Contract training is primarily one-on-one selling. Spending a great deal of money on producing and mailing promotions may not be as beneficial as making sure your staff is following up on calls and working on developing new clients. Do not let b your total promotion (REMEMBER, promotion does not include salespeople!) expenses exceed 5% of your income.
- Do not incur product development costs for products that do not have a reasonable life span. Three years is a reasonable life span. Review the pricing section to see how much money should be spent on product development.
- Make sure that the director of your program is spending at least 50% of his or her time helping identify new clients and helping identify new markets for your present products. Doing this will increase income and reduce expenses as a percentage.