First Friday Forum
“Cost-Saving…Today”
February 6, 2009
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Your Speaker
Michael McDermott
• Volunteer – Richmond SCORE
• Principal, Enterprise Tune-Up, LLC
• Expertise in profit improvement,
productivity improvement, LEAN/Six
Sigma for service companies.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
SCORE
• Service Corps Of Retired Executives
• A volunteer organization dedicated to helping
emerging and existing small businesses.
• The nearly 400 chapters nationwide are partially
funded through a grant from the U.S. Small
Business Administration.
• SCORE counselors are retired or actively
employed experienced business executives and
technical experts, some from major Fortune 500
companies, or successful small business
owners. They agree to work under high ethical
principles without compensation.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
SCORE Services
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Monthly “How to Start a Small Business” and periodic
specialty workshops
Practical Mini-Workshops on a range of small business
issues
Unlimited free one-on-one counseling
Email counseling
Veterans’ assistance
Referral to business information on the Internet and
elsewhere
A valuable source for local networking contacts
Mentoring from sage professionals with decades of realworld experience.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost
Reduction
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
How To Start with Cost
Reduction
Use the “80/20 Rule” (Pareto Principle).
Chances are that 20% of your expenses are
responsible for 80% of your cost. Make a
detailed list of ALL expenses and break budget
items down into specifics. For example, break
“office supplies” and “transportation” and
“shipping” down into their smallest components.
Sort them from largest $ at the top to smallest $
on the bottom and work on reducing the top
20%.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips
• Make sure that the owner approves ALL expenses and
signs all checks.
• Try to negotiate better terms with banks, vendors. Ask
for longer pay terms; volume discounts. Shop around for
a bank with better business rates and fees. There are
reports that some credit card companies are lowering
rates if you just call and ask them to.
• Take advantage of interest-bearing checking accounts.
• Get lines of credit at two different banks before you need
the funds. Shop for rates and terms. If the bank
threatens to stop your line for lack of use, draw on your
line and put it into a savings account at another bank.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips
• Try renegotiating a lease; ask for downward rental
adjustments. Your landlord may be better off reducing
your rent than trying to find another tenant. It can’t hurt
to ask; owners are MUCH more flexible now.
• Sublease unused office or other space.
• Accept credit card payments from customers. There is a
fee from the credit card company (typically 2%-5%) but,
on the plus side, your cash flow improves and it may
result in the addition of customers who didn’t use you
before. More people use credit cards in a recession.
• Consider borrowing against the cash-surrender values of
life insurance policies. Check with your insurance broker.
• Interest rates are WAY DOWN. Refinance outstanding
loans or consolidate loans to obtain a lower interest rate.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips (con’t)
• Join a barter network. There is a fee to join and
research them before joining. (Some have been
investigated for fraud.) You must report bartered
goods as income. The good news: your tax
liability—particularly if you do a lot of bartering—
is lower since the fair market value of bartered
goods is usually less. You may get some
inventory turnover or use some of your available
services time. There are two in Richmond:
– BancMarc: www.bancmarc.com
– James River Trade Exchange:
www.jamesrivertrade.com
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips (con’t)
• Sell idle assets, inventory, machinery, displays, etc. using
craigslist.com, auctions.yahoo.com and ebay.com and to buy
inexpensively. Get over it: the value of anything is what someone will
pay for it TODAY; not how much you paid for it six months ago or
how much you sold it for two weeks ago. Remember that you’re
paying interest every month on the money you borrowed to buy the
materials and keep it in inventory.
• Printer ink and copier toner cartridges. Save 50% to 75% off the
price of brand new cartridges by using re-filled ink cartridges
available online and a local company will pick-up & deliver refilled:
[email protected]
• Consider converting from a weekly payroll schedule to semi-monthly
or every two weeks. Give employees PLENTY of notice.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips (con’t)
• Save on postage and delivery by using email. For large
email files as attachments, check out services such as
yousendit.com, mailbigfile.com, dropbox.com. Digital
and emailed contracts are generally binding as long as
the recipient provides some sort of electronic signature
(which can be as informal as simply typing their name).
• Earn points from loyalty programs. Credit card
companies (whether issuer or merchant accounts)
commonly offer discounts and bonuses based on
customer loyalty. This may include frequent flyer miles,
discounts on hotels and rent-a-cars, and program points
redeemable for office supplies or other merchandise.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips (con’t)
• Shipping: the U.S. Postal Service offers flat-rate shipping to
everywhere in the domestic U.S. if you use their flat-rate
envelopes or flat-rate boxes. As long as your items fit inside, you
pay one price for shipping whether it's going across the state or
across the country--plus you get the boxes and envelopes free.
This can be especially valuable for shipping small but heavy
items.
• Check your postal scale: 9 pennies should show one ounce.
• Join your trade and industry associations; they offer many costsaving deals from rental cars to office supplies to insurance. In
addition these organizations may provide you with information
regarding inventory and profit ratios within your industry—an
important way to track your success. Retail Merchants
Association!
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips (con’t)
• Watch employee theft. Lock up supplies if necessary, develop
a sign-out system. Establish an anonymous feedback system
to allow honest employees to alert you to dishonest
employees. “Shrinkage” is one of the top reasons for profit
slippage in retail operations.
• Cut your long distance and telephone charges. Look into
Internet telephone services such as Skype or Vonage that
allow you to communicate nationally and internationally at a
fraction of normal telephone rates by calling over the Internet.
Double check that you are getting the best value on your
phone service with a FREE, no-strings-attached,
telecommunications evaluation from Telepath: 804-339-3532,
[email protected], www.telepathinc.com
• Call suppliers or customers on their 800 numbers.
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
Cost Reduction Tips (con’t)
• Consider adjusting business hours to meet customer
demand (open Sunday Noon- 4pm?)
• Start an incentive program or paid Suggestion Program
for ideas on how to save money/time, increase
productivity, increase customer satisfaction.
• Lease rather than purchase vehicles and real estate. For
vehicles, consider a Terminal Rental Adjustment Clause
(TRAC) lease that guarantees your business a certain
residual price for the vehicle when the lease expires.
This is the most common type of lease for business
owners who want the option of buying the vehicle for a
pre-determined price at the end of the lease.
ALWAYS read the contract fine print!
• Cancel insurance on vehicles and equipment not in use
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
SCORE Counseling
Cost-savings ALONE may give you a 20% improvement, at best. If you are
smart enough to attend this forum, then you could benefit from a complete
review of your business tactics and strategy.
You can request FREE one-to-one business counseling sessions at:
www.richmondscore.org
which can be held at:
• The SCORE office in downtown Richmond
• Another location more convenient to you and your counselor such as
libraries, Hispanic C of C, Goochland C of C, Barnes & Noble and other
bookstores, Starbucks, Panera Bread, etc
• Online
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131
®
Counselors to America’s Small Business
Chapter 12 – Richmond,VA
2004 National Chapter of the Year
Federal Building ▪ 400 North 8th Street ▪ Suite 1150
P.O. Box 10126 ▪ Richmond, Virginia ▪ 23240-0126
Website: www.richmondscore.org
E-mail: [email protected]
Tel: 804-771-2400, ext 131
Counselors to America’s Small Business
www.richmondscore.org
804-771-2400 x131