According to a recent survey, 34 percent of small business owners cited managing cash flow as their toughest challenge in the current economy, followed by 15 percent who said keeping healthcare and insurance and costs in line were the primary challenge.
TD Bank, which conducted the survey, asked small business owners across the Northeast, Mid-Atlantic and Southeast regions how they believe 2010 will compare to 2009.
Some 66 percent of small business owners said the recession has had some level of negative effect on their business, with 23 percent rating the impact as very negative.
For the one-quarter of business owners who said they have not been adversely affected by the recession, some 29 percent of them identified streamlining costs as a huge factor in their success.
And as businesses head toward the end of 2010 and look forward to the coming year, nearly half of business owners surveyed identify their overall goal as, quite simply, to save more and spend less.
“Simple,” perhaps in concept anyway. To successfully curb spending, one has to analyze costs and expenses and scrutinize business activities to identify potential money cyphoners. Then, it is a matter of making educated decisions about what can be cut, what should be cut and by how much. There is a fine line between reducing spending and taking drastic action that will severely diminish a company’s quality of service, effectiveness and overall operations.
To help initiate cost-cutting within the company, consider these ideas:
Set up corporate travel plans with car rental companies, hotels and airlines. Even small businesses can earn rewards and get fixed pricing. Also, the fee, often just $20, for a travel agent is less expensive than having an employee take time from his regular duties to look for the best rates online and, in the process, perhaps not realize hidden charges. An $80,000 per year employee that takes more then five minutes to book flight is a loss.
Sometimes service contracts have great flat fee unlimited service, but if you look at how much service has been performed during the past three years, you can get an idea of what is better – $10,000 per year service on a machine or $150 per hour to fix it. If you have had only one or two problems per year and the vendor spent five hours each time for repair work, it might be worth the risk to save the money and pay whenever the equipment breaks instead of going with a service contract.
Having employees expense their personal cell phones is a bad idea for two reasons. First, your company does not get as good a price as with a bulk plan. Second, if the employee leaves and/or tries to start his own company, he retains the telephone number that all of your clients have to reach that now former employee.
Be aware of automatic renewals on leased business equipment. Such contracts, when they expire, roll over into new yearly or multi-year contracts without negotiation of length of contract or terms, potentially leaving you with a longer and/or more expensive contract than you could have secured through negotiations or price shopping.
As a couple of these examples touch on, a key in a cost-reduction effort is to review for billing errors, cost reductions and refunds all accounts for which the company receives recurring bills – utilities, telecommunications, waste removal and/or janitorial services, property tax bills, workers’ compensation plans, cable/satellite TV, for example.
It can be a daunting task, but consultants are available to lend their time and expertise to support the process. And, consultants have at their fingertips benchmark pricing. Thus, a business owner may believe he or she is getting the best rate the company has ever gotten from a vendor but that same business owner may not know what pricing the business owner down the street is getting. The consultant is able to make knowledge-based comparisons.
And finding a refund on a past payment, for example, is cash in the business’s pocket and can be categorized as pure profit. Finding just $5,000 per month becomes $60,000 per year and $300,000 over five years. The new found cash can easily translate into the cost of hiring a new employee, adding and/or upgrading equipment or making other major purchases.
With minimal staff involvement, giving the consultant an opportunity to discover hidden monies for the business and with a structure such that if no savings are found, no consulting cost is billed makes the endeavor worthwhile. Simply choose carefully to find this type of structured agreement.
About the author:
Dan Schneider is founder of SIB Development & Consulting, a cost recovery and expense reduction firm. Its goal is to cut operating costs for businesses of all sizes and industries across the U.S. A high school dropout, Schneider has overcome many obstacles to become the successful business owner he is today. Schneider lives in Charleston, S.C. For more information, visit http://www.aboutsib.com.