Cut Costs to Increase Profit!
By Dr. Robert Sullivan
What do you think is easier to do ... reduce your expenses by
5% or double your sales? I think most would agree that reducing
expenses might be easier. Why, then, do most business owners
spend little time on attempting to reduce expenses? Consider
this: Your current profit margin is 5% - if you reduce costs by
5% your profits double! Of course, you can do the same thing by
merely DOUBLING your sales! Right.
It is amazingly simple to reduce operating costs by a few
percent by being diligent. This article will provide you with a
listing of some of the specific ways in which operating costs
may be reduced. You may find that you can reduce spending
considerably by observing only a few of the suggestions. And
remember, the small stuff adds up! Think about saving each time
you spend and you will discover your own ways to save.
GENERAL GUIDELINES
1. Comparison-shop for everything.
2. Negotiate whenever possible. Ask! You will be surprised at
how frequently a vendor will negotiate a price. Attempt to
negotiate EVERY purchase.
3. Utilize mail order. It's quick and frequently the best
prices are available via catalog sales.
4. Use the Internet to research a purchase. Nearly every
vendor has a website containing product, pricing, and ordering
information. This can be a tremendous time saver. Also, your
research may lead you to a less expensive alternate.
TRAVEL
1. Save and monitor your frequent flyer miles. Use them
whenever possible. Also require your employees to return miles
earned on company business back to the company.
2. Consider a travel club. Many provide discounts that you
cannot obtain as an individual.
3. Try to combine travel, hotel, and automobile rental into a
single package. This can frequently save you money.
LEGAL
1. Before you decide to pursue a legal course of action,
consider the chances of being sued in return! This might result
in greater costs than you would receive from your initial action.
2. Consider arbitration or mediation as an alternate course of
action to resolve a legal problem. This can produce quicker
results at less cost.
3. Get your attorney involved early in any possible crisis.
UTILITIES
1. Monitor energy usage. Utilize auto-setback thermostats and
auto-off light switches.
2. Have an energy audit performed by your local utility
company. Their suggestions can save you considerable expense
over time.
3. Ensure all employees are "energy aware." Start a contest
and give a prize to the employee who provides the best
suggestion for saving energy.
SHIPPING, MAILING
1. Educate yourself about the various postal rates. Visit the
USPS website at http://www.usps.gov for complete descriptions of
mailing options and rates.
2. If you use a postage meter, ensure authorized personnel
lock it when not in use. Note that the Post Office will refund
any machine imprints that were not used.
3. Plan your shipping or mailings to avoid overnight or second
day delivery that is MUCH more expensive than alternate methods.
If you must ship overnight check the various carriers as well as
the post office for the best rates.
4. When providing customers with literature (sales, technical,
other printed information), use e-mail or FAX if possible.
INSURANCE
1. Ensure your company (or personal) vehicles are classified
properly for maximum savings.
2. Review your various coverage's to ensure you are not
"double insuring."
3. Do an annual insurance review to make certain you have
coverage you need but are not carrying something unnecessary.
4. Have an effective safety program! Just ONE workplace
accident can send your insurance rates skyrocketing.
5. Make certain that all employees are classified properly for
workers' compensation insurance. Rates vary widely.
6. Shop for all your insurance needs and periodically ask for
competitive bids.
MISCELLANEOUS
1. Monitor office supplies. My guess is that at any moment you
have twice what you need!
2. Purchase office supplies from discount suppliers. Shop by
mail. There are numerous discount mail order suppliers. Get on
their mailing lists so that you are aware of their sale items.
Time your purchases to take advantage of these discounts.
Viking 1 800 421 1222; (Our favorite - free shipping on
orders over $25)
Consolidated 1 800 362 1000;
Quill 1 800 789 8965;
Penny-Wise 1 800 622 4411;
National Bag 1 800 247 6000;
BrownCor 1 800 327 2278; etc)
3. In general, extended equipment warranties are not worth the
cost.
4. Monitor telephone usage. Shop carefully for your long
distance and/or 800 number suppliers. Prices vary widely as do
the various fees.
Robert Sullivan is the author of The Small Business Start-Up
Guide , and United States Government - New Customer!. He
frequently lectures on starting small businesses and appears on
CNBC's "Minding Your Business" as a small business expert. His
books may be ordered toll-free by calling 1 800 375 8439.
Robert also developed and maintains an extensive award-winning
Internet website, "The Small Business Advisor," at
http://www.isquare.com)
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