Businesses are always looking for ways to cut costs, so SBN gathered the following tips from consultants and businesses across the country:
- Outsource or utilize part-time or temporary employees, says Charles Freeman, chairman and CEO of Commercial Capital Corp. “These options virtually eliminate the expense of fringe benefits, which generally add 25 percent in expenses over and above salary.”
- Manufacturers should consider subcontracting work to become more cost effective.
- Refinance to take advantage of lower interest rates.
- Explore the economics of leasing rather than purchasing equipment.
- Consider joining cooperatives or other business alliances in your industry to take advantage of mass purchasing power.
- Look at the obvious places first. “If you hear hoof beats, you shouldn’t turn around and expect to see a zebra. Instead, you should expect to see a horse,” says Paul Brown, author of “Surviving in the Business Jungle.” This means if you’re trying to cut costs, you shouldn’t look at exotic ways of doing it, but instead start with the most obvious, such as travel, entertainment, office supplies, express mail and temporary help.
- Track every customer who comes to you, says Shel Horowitz, author of “Marketing without Megabucks.” You may find, for instance, that one category in the Yellow Pages brings 50 percent of your business, while other ads might only bring in 1 or 2 percent. Once you know this, you can focus your marketing dollars where they’re doing the most good.
- Develop marketing materials that aren’t time sensitive, says Jonathon Simmons, a business consultant at the NRV Small Business Development Center in Virginia. When developing a brochure or other signage, say, “In business since 1985,” instead of “In business for 15 years.” This allows you to keep using the same promotional items without having to reprint them each year. Another example is including a price insert in the brochure or catalog instead of printing the price directly on the item.
- Don’t overlook your knowledge purchases, says Richard Rowe, CEO and Founder of RoweCom Inc. Most corporations tend to overlook things such as newspaper and magazine subscriptions as a place to cut costs. Many companies have no idea what their inventory of publications is.
- Cancel redundant insurance, says Gina Dickerson of Bitner.com. “We lease our postage machine and our copier from local vendors. Taking a closer look at the invoice last month, I noticed we were being charged for insurance on the machines. Our company has personal property insurance, which includes all the machinery in the office. It didn’t cost any extra money to add these machines to the policy. As a result, Bitner.com will be $480 richer this year.”
- Find cheap mailing lists, says William von Achen, president of Strategic Management Resources. City hall can be an inexpensive, up-to-date source of mailing lists for a direct mail campaign. If you target your products or services to businesses in your community, ask for a listing of the DBA (doing business as) certificates issued by the clerk’s office. It is surprisingly affordable, often as little as $50 for the entire list.
- Don’t pay retail for computers. A number of computer manufacturers offer refurbished models for a fraction of the price of new units. The term refurbished or reconditioned can vary from company to company, as can the warranty terms, but depending on your needs, such products can cost a fraction of their brand-new counterparts.
Todd Shryock ([email protected]) is SBN’s special reports editor.
