Does your startup have money to burn? If so, you can skip this article.
But read on if you want real advice on business cost reduction - avoid wasting precious dollars on little things like express deliveries, office supplies, service contracts, travel, phone and internet services. Plugging slow leaks in your bottom line caused by overspending on the small stuff can put more profits in your pocket.
No matter what size your business, or what the economic climate, one of the best ways to make money is by saving it and reducing costs. Keen competition and paper-thin profit margins have made running lean a necessity for most startups, and developing smart buying habits from the beginning can be just as crucial to profits as savvy selling.
Entrepreneurs often overspend on routine items because they’re too busy to take notice. But it all adds up…even the small stuff. Cash you save on needless expenses goes right to your profit column. When it comes to cutting costs, common sense rules. Like successful dieting, a successful approach to saving money uses small, sustainable steps to achieving a flatter company tummy.
Service contracts are a good example. We buy them for their perceived safety net and the fuzzy feeling they offer. But as good as some service contracts may be, left unchecked they can bleed precious cash.
Steve Sonet, a partner in the New York law firm Levy, Sonet & Siegel, felt that his firm was wasting money and sought help from cost management consulting firm AMK Associates. A simple change in Sonet’s service contracts netted $6,000 in annual savings. Another small company, Automated Concepts, Inc., saved $80,000 by negotiating better deals with printing and office supply vendors and switching delivery services and long distance carriers.
Five steps to business cost reduction
- Banish office supply anarchy: Avoid buying only name-brand items in small quantities. Shop for bargains online. Superstores like Office Depot, Staples and Office Max offer “store brands” at reduced prices. And when you establish an online account, they’ll often send coupons worth $10 or $20 off orders of $100 or more.
- Foil photocopying follies: Don’t photocopy high-volume items that you can print for less. Copies typically cost five to fifteen cents each, even if you do them yourself, including paper, toner, labor and maintenance. Printing can lower costs to three cents or less. Biggest cost culprits are forms, flyers and form letters that you think you use in small quantities. But if you photocopy a few dozen per week, that can be thousands per year and you could save by having it printed. One great online source for printing is PrintingForLess.com.
- Be an inventory maniac: Think of your inventory - raw materials as well as finished goods - as company cash sitting on a shelf or in a warehouse doing nothing. Costs include storage, insurance and taxes, among others. Keep good records and regularly root out dead items.
- Kick the overnight habit: Express shipments for next morning delivery are costly. Consider next afternoon or maybe two- or three-day service.
- Review everything annually: Review vendor relationships at least annually for internet services, phone, wireless, DSL, shipping, legal, printing and other day-to-day expenses. Prices and package deals change, and you may be overpaying.
Our Bottom Line
Plugging slow leaks in your bottom line caused by overspending on the small stuff can put more profits in your pocket. No matter what size your business, or what the economic climate, one of the best ways to make money is by saving it through smart business cost reduction.
© 2005 BizBest Media Corp.