How to trim your costs

Imagine reading a headline that says “Cut your costs by 50 per cent or more!” That would suck in nearly every small business operator, and when I read it in a American magazine a few years back, it did the trick on me.

The magazine went to experts in, wait for it, downsizing and turnaround strategies, and their starting point advice was “involve staff input right from the start”.

They came up with seven key profit-killing problems and seven ways to trim crippling costs. They may sound simple but think about them for your business and see the difference they make.

Shocking electricity bills
Nowadays there are businesses that specialise in expense reduction analysis. The businesses work on the idea that many businesses are so busy they do not analyse their bills for mistakes and they don’t find out what discounts or alternative suppliers are out there.
This same strategy applies to phone, petrol and so on. A firm called Expense Reduction Analysis has a deal where it shares 50:50 the expenses savings found in their first year.
They and other firms might be arm-twisted to offer a better deal.

Supplier prices too high
The US-based firm Source 1 Management insisted if you put the squeeze on your suppliers and say you have to get a better price 70 per cent of suppliers will come to the party.
The percentage is big and must be worth a try. Remember the old cliche that anything worth doing is worth doing for money.

Technical cost hitch
Technology outlays can be a big strain on cash flow and, as we all know, they are expensive.
The Americans advise that buying computer gear via mail order is 10 to 20 per cent cheaper than through stores.
Leasing computer equipment is another way to lower costs and improve cash flow. A local firm, Rent Smart, has done the figures on this and can prove this is good advice.

Hiring staff is expensive
Your Company magazine quotes from a survey that pinpointed recruiting as “one of the biggest problems now facing small companies”. Recruiters are becoming increasingly competitive and it is sensible to ring around and compare costs of alternative recruitment agencies.

Employment costs are too steep
A key area to start your outsourcing is in the hiring of temps and outside contractors.
Many firms not only cut their costs this way they find many of the temps wind up as permanent employees.
The casual hiring process effectively becomes a screening process for the time when business owners want to engage a permanent employee.

Routine purchases are too expensive
Now this one is from left field for many but the advice is not to rule out barter.
Bartering can substantially cut into your costs. In recent years corporate bartering has taken off in Australia.

Outside experts can be expensive
The Americans advise that local universities with their Small Business Departments can offer inexpensive solutions to some of your consultancy requirements. This one might not translate so well as few universities have Schools of Small Business, though some Schools of Business might, and I warn, might, be helpful.
As an alternative, it would be sensible for everybody in small business to acquaint themselves with the government agencies and groups which help small business.

By Peter Switzer, published on 1/10/2008

COMMENTS