4.3 Control costs of after-hour meals
If your business regularly reimburses meals to employees who are working late, control costs by organizing evening meals. Ordering off one menu reduces delivery charges, and may encourage a group to share meals (e.g., pizza or subs) to further reduce costs. Also, in order to reduce the costs of individual drinks, keep soda and other refreshments in stock.
4.4 Find a solution for excessive overtime
Overtime can be very expensive for small business owners. Employees paid on an hourly basis are entitled to time-and-a-half for overtime work and sometimes even meal reimbursements. If one or two employees are regularly completing an excessive amount of overtime, it may be cost-effective to add an additional employee part time, rather than pay the additional overtime expenses.
4.5 Deal with weak employees
Some employees may have less to do during a troubled market. As a result, these employees may still be getting paid full-time salaries even though they may no longer be earning them. To resolve this, you may want to consider changing their hours or increasing their workload. Until the volume increases, it may be possible to switch some of these employees to part time during this lull. If possible, you may even want to lay off the weakest performers and add additional new staff members when the company’s profitability increases.
4.6 Review employee expenses
In some organizations in which there is little management oversight on employee expenses, employees may take advantage of the system to obtain reimbursements for entertainment and expenses not related to your business. By checking all reimbursements yourself, or at least making a policy of spot-checking reimbursements, you may be able to reduce unnecessary expenses. Remember the responsibility of ensuring that all the expense information is submitted should be part of an employee’s responsibility before reimbursements are paid. If you do not have enough information to approve the charges (e.g., a 100-mile gas reimbursement without paperwork documenting the distance to the customer), return the paperwork to the employee and ask for more information.
Lifesaver: If your employees often travel more than 20 miles to your customers, your service may not be as profitable as it may appear. Factoring in mileage reimbursements and hourly employee costs may drop your margin lower than you realize. To counterbalance these expenses, charge your clients a trip fee. This will reduce expenses and may even become a profitable charge for your business.
5. Eliminate Hidden Marketing and Advertising Costs
Marketing and advertising is one of the most critical components to a small business. This could include newspaper and magazine ads, free promotions, public relations, client meals, and any other expense that is designed to draw customers and retain clients. Examples could include free beverages provided to browsing customers, holiday baskets for clients, or promotional giveaways imprinted with the company logo. Each of these items has a cost, but the revenue these items generate should offset these costs. Ideally, your marketing and advertising should bring in more revenue than it costs, but at the very least, you should break even.
Unfortunately, many small-business owners often want to cut their marketing and advertising as soon as times get tight. While this may seem like a good idea because it immediately frees up cash and reduces expenses, it may not be the best course of action for a company that is trying to grow. If you are trying to rebuild a business, you will need to invest your time and sometimes your money in advertising and marketing. Further, the customers you bring in with these tools, presuming they have a positive experience, will also add to your customer base and bring in more customers through referrals.
Instead of simply cutting your advertising, try to reduce the cost of your advertising. Call each marketing company and advertising vendor and ask for a detailed list of your spending. Ask for them to outline each charge and how it applies to your bill. Specifically, ask if there are any additional fees you are paying for specialized and sometimes unnecessary service. You may be surprised at the costs you will find. For example, a newspaper may charge an extra $0.60 per line if any line in the classified ad is bold. Therefore, in order to add one bold line to a small six-line ad, the cost of the ad will increase by $3.60 per day. This means that more than $1,300 per year will be spent on one line of bold in a small classified ad! In this case, unless the bold is a significant advantage it may not be necessary. Ask your advertisers the following questions:
• Is there a difference in cost between a two-color and full-color flyer?
• Does bold print used in the classified ad cost extra?
• Do you provide any discounts if I sign a long-term contract? (Note: Only agree to sign a contract after you are sure that your advertising is bringing in new customers.)
• Am I paying a premium for my location in the periodical?
Aside from understanding your expenses, ask if any additional services are offered with your advertising. For instance some advertisers offer ad design with the purchase of a regular ad spot. They often will help with layout, wordsmithery, color choice, image purchasing, and other design elements in order to retain your business. Using these services instead of outside marketing companies or even in-house staff may save money and even improve your ad’s professional appearance.
Another question to ask is whether the advertiser offers any additional advertising opportunities at little or no cost for their regular customers. Some newspaper companies have multiple newspapers in one area. These companies will often display your ad in more than one newspaper for the same price. Although advertising companies may be unwilling to negotiate price, some advertisers may be willing to add additional advertising to retain your business.
Moneymaker: One way to bring in new clients and customers is to become a local expert. To do this you can approach a local small newspaper or magazine (preferably one in which you advertise) and ask if it accepts free articles. Write on topics related to your business and you may be surprised by the amount of traffic it can generate. One magazine we write for brings in at least two new business clients each month.
For each of the promotions that your company provides, ensure that you are including all of the expenses with the promotion. Shipping costs, design costs, and other expenses can make a small promotional giveaway a very large expense. If you are running promotions, make sure that you are leveraging it as much as possible. For instance, if you are giving away an item, it may be valuable to add your custom logo to the product. If you can’t afford the logos, a simple, small sticker may be good enough to keep your company name in your customers’ minds.
Similarly, if you are spending money on meals and entertainment with your customers, make sure that you are investing your money wisely. In many industries, when times are lucrative, these expenses can grow. Cutting back when times are tight will be understood by your employees and customers alike. In 2000, when the technology sector was booming, and companies were practically throwing money away to build websites, lavish client meals were expected. Today, in a more mild economy, such garish displays in many industries are now considered wasteful and are unnecessary to close a deal.
6. Check Your Own Charges
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