More on the value of making incremental changes to accomplish big things.

Can you find a free source for some of your raw materials?  Dan Phillips, a private citizen in Huntsville, Texas, was concerned about two things:  the amount of trash going into landfills and the number of people who were homeless.  He began digging through the garbage, using what he found to build homes.  His company, Phoenix Commotion, Inc. now builds low income housing with at least 80% recycled materials.  Some of his imaginitive creations include a ceiling made of picture frames, a roof made of cast-off shingles, another roof made of scrapped license plates, and a floor made of wine bottle corks. He makes the homes available to low income famiilies at a cost of $199 to $450 per month.[i]

Digging through garbage may not be the best way to find a reliable supply of an important raw material, but put your thinking cap on.  Are there other businesses that use something similar such that their scrap is your raw material?  Maybe they'd let you have it for free if you haul it away. 

I used to work in a pretzel manufacturing plant.  When I first started working there, broken pretzels were simply thrown out as a quality concern.  It wasn't long, however, before someone figured out that hogs love to eat pretzels, and they don't care whether they're broken or not.  Local farmers were asked if they'd like some free broken pretzels and would be willing to haul them away.  Problem solved.  The plant had to pay for fewer dumpster pulls, the hogs were well-fed, and the farmers were happy to get free feed.

Consider vertically integrating your business.  For example, let's say you are making tomato sauce.  Your key ingredient obviously is tomatoes.  Could you grow them more cheaply than you are buying them?  There may be an initial start-up expense such as buying a large field and a tractor, but you may be able to get a start-up loan for that.  Then you can pay back the loan with the money you save by not purchasing your tomatoes from someone else.  And now that you are growing your own, you may qualify for government subsidies to farmers, yet another source of revenue. 

Now if you live in Alaska, chances are you will not save much money because you'd have a very short growing season, but you may be able to find another way to vertically integrate such as by making fuel to fire your stove from native fish oil.  Or perhaps you can make a seafood-flavored sauce to fill a niche market, using fish indigenous to your region.

Even if you choose to continue buying your raw ingredients from others, think about your current suppliers.  When was the last time you looked for competitive bids?  Have you ever asked your supplier if you could get a discount because of the volume you purchase from them?  As your business changes and evolves, it pays to review your purchase agreements.

Is there a price break from your supplier for a larger volume purchase?  For example, if you need 500 pounds of fiberfill per week, can you get it cheaper if you switch to bi-weekly deliveries of 1,000 pounds?  Of course, you will need to have a place to store the additional 500 pounds, but if space is not an issue, you might save money not only on the product, but also on the shipping. 

As you can see, none of these tweaks involves totally changing your business model.  They are small changes that might make a huge difference in your profit margins.