Cutting Costs in the Spirit of Entrepreneurship

Cutting Costs in the Spirit of Entrepreneurship
A.J. Hall

Adult website owners are comprised of two groups: One is comfortable giving up 30-50 percent of their site’s gross sales revenue (aka profit) in exchange for software, hosting and services despite being able to obtain them for as little as a few hundred bucks a month.

I envy this group because someone comfortable with giving up such a large percentage of their business must be doing so well that they don’t need or don’t miss all that money. Those in the other group, however, are eager to keep things as lean as possible and to keep every penny possible.

Unless you’re employing family members, close family friends or operating a charity, consider using technical advancements to your advantage to cut costs.

I myself belong to the latter group and that group also makes up most of my present Elevated X software customers — those who regardless of whether they make $1,000 a month or $100,000 a month, are as serious as it gets when it comes to maximizing their operations. For most, this means trying to save as much money as possible and cut operating costs.

When I get an email from someone about cost, all they’re looking for is me to say, “Sure, I will lower your CMS software cost.” That doesn’t happen, simply because the cost is already low. Instead what I tell them is “You’re looking to me to lower a fixed cost 10-20 percent so you can save $20 a month when instead you should be looking at the things that will lower your costs by $5,000 a year.”

That approach is like going into a grocery store and haggling over the price of a roll of paper towels when you’re in dire straits. It might seem helpful when you’re panicked about money but it isn’t going to make a difference in the long run.

If someone emails me looking to save $20 a month, they’re already in big trouble. The CMS software we provide is literally the core of someone’s online business. Making a price cut there isn’t like someone losing their job and giving up their $5 a day Starbucks habit, it’s more like trying to go without electricity.

I do my best to help turn things around, or at least prevent their going out of business if possible, usually with a high rate of success, even if that means keeping someone hanging on for another year when they were close to calling it quits. I appreciate entrepreneurship, and if I can’t save someone’s paysite business chances are no one can.

1 Trim the fat. Literally.

One of the easiest ways to cut costs is to trim fat from a bloated operation by reducing human resources. Sadly, in our industry as in many other facets of live, increased automation has reduced the need for manual labor.

For many adult businesses, the days of an “affiliate manager” being high value are long over, along with the days of needing someone to take content from a video editor and update a website. If you think you can’t do these things yourself, you might be surprised.

As much as I hate to see people be let go or be replaced with technology it’s all part of business evolution and sometimes outsourcing or cutting back to part time to save thousands or tens of thousands is the best thing to do.

2 Evaluate your current needs.

The key word is “current.” This needs change. The software or services or attorney on retainer or 800 number you have may have been a necessity at one time but might not be one anymore.

Examples for strictly web-based operations range from physical/remote offices, attorneys and bookkeepers and local, network or web hosting hardware and affiliate software.

When affiliates accounted for 80 percent of many adult businesses’ revenue, dedicated affiliate platforms were almost a requirement for success. Now that affiliate traffic accounts for a fraction of total sales, many an adult site owner has been pleasantly surprised to learn that they can get by just the same with the affiliate setup provided free by third-party billing companies at a cash savings of over $5,000 a year.

Figure out what you currently need. You might be surprised at what you can do without. If like many business owners you realize you don’t miss it once it’s gone, your only regret will be that you didn’t make the change sooner.

3 Look at the things you think are fixed costs but really aren’t.

Mortgage lenders and credit card companies rely on the fact that most of their customers don’t pay enough attention to interest rates and are complacent enough to pay the same amount of interest, don’t know they can lower their rates or are simply too lazy to look into that possibility.

The same goes for credit card processors and merchant service providers. I know because I was one of the people above who went years without thinking about my processing rates since after all, my rate was already 3.5 percent and that’s pretty low. To make a long story short, all it took were a few short emails and my rate is now 2.9 percent.

It’s hard to believe you could save thousands or tens of thousands of dollars per year just by spending a few minutes to send an email. I simply sent our current merchant bank a competitor’s quote and they matched the rate. Sometimes saving money is almost completely effortless.

4 Take advantage of new technology.

Hardware has changed a lot and so has infrastructure. Things are cheaper and more efficient. What once required three servers now requires two.

Many of my customers are shocked when we do audits of their web hosting services and I say, “You don’t need this.”

“This” varies and can be anything from a CDN to separate dedicated encoding server, separate tour servers or video streaming services that are now software-based.

Software has also changed. The Elevated X CMS platform, for example, is able to encode videos and stream them, yet I still have customers who are paying a person to manually encode videos.

Unless you’re employing family members, close family friends or operating a charity, consider using technical advancements to your advantage to cut costs.

5 Say goodbye to yesterday.

I saved the best for last. Believe it or not, the single biggest way a lot of my own customers have reduced their cost is through lowering their web hosting bill by way of removing old, outdated content formats.

I have one customer who operates a handful of “small” model sites. Small is in quotes because the sites theoretically are small, despite using upwards of 8 Terabytes of storage space — an absurd amount that’s nearly five times the amount they should be using based on content volume and quality.

All those old 800- and 1024-resolution photos and the 640 WMV and FLV files from 2004 still sitting on your server take up a lot of space.

Advancing web technology, better CMS software, cheaper computers, better mobile devices and better web browsers have reduced the number of required file formats and sizes. This drastically reduces the storage needs for mature businesses but a lot of people never think to go back and remove outdated files even if they no longer offer them to customers.

All it takes is a quick look at your server and a support email to your web host asking them to do a universal removal of all files of a specific format or file extension. Don’t be shocked if your hosting bill is cut in half as a result.

In conclusion, next time you’re thinking of haggling with someone or removing something from a mission critical part of your business operation to save $200, look instead to the ways you can save 10 or 20 times that amount, possibly in multiple places.

AJ Hall is a 16-year adult industry veteran, winner of the 2016 XBIZ Tech Leadership Award and CEO of Elevated X Inc., a provider of popular adult site CMS software. Hall has spoken at industry trade shows and written for several trade publications. Elevated X software powers more than 2,000 leading adult sites, has been nominated for more than a dozen industry awards and won the 2012, 2014 and 2015 XBIZ Award for Software Company of the Year.