You don’t have to go into debt, compromise quality or performance to cut business costs. There are significant ways to save money without compromise. How? Most of the techniques revolve around “productivity transfer,” where you get the same results by using alternative resources at a lower cost point. Here’s how:
1. The Power Of Pooling
Pooling takes some effort, but the savings can be huge. Contact other providers in your industry that buy from the same suppliers you do. Agree to work exclusively with one supplier for a period of time (I suggest minimally 3 years). Pool your combined purchasing power (and determine the savings you want – for example a 25% cut). Then go to the suppliers and tell them that you are all going to buy from the one vendor who offers the best price and the best deal. You and each of your providers will still buy with your money, but you’ll commit that money to that one vendor. The big numbers are very attractive to buyers and they may offer you a bargain.
Full time employees don’t necessarily work full time. If you don’t have work for employees, you’re paying them to be idle. Consider hiring contractors, and only pay for the hours worked. It is a win-win in many circumstances. Your contractor makes more per hour (and can serve multiple clients), while you pay for only what you use. Contractors are often extremely talented at what they do – so you get high quality services. I think it is still crucial to have a core talent – one derived from full timers. But, not everyone on your team should be full time.
3. Free Advertising
Unused advertising is one of my favorite methods of all time. Billboards, signs or websites where a business has gone out of business often have a number that’s still displayed, but disconnected. Call your local phone company and have that number redirected to you (if its been disconnected). Instant prospects! When customers call, let them know the business they were calling is out of business, but that you are there to service them. And yes, you can save tons of money by dropping the advertising you were paying for.
4. Telephone Costs
Telephone systems are expensive. Really expensive. But by combining a few free, and near free, services you can save tons of money, and the quality and flexibility of your system may increase. Try using Free Conferencing for free conference call services; Skype’s premium business phone (which is less than $3 a month) is great; and Grasshopper has a virtual phone system that can cover as many employees as you want.
5. The Office Space
The recurring cost of renting office space is usually the largest SG&A costs on an income statement. Good times or bad, every month you’ve gotta pay that rent. You have three options that can save you big money. First, convert your business to a virtual presence. You can have your employees work from home and get rid of the office in its entirety. Second, approach other spaces that already have tenants committed to long leases. More and more tenants have extra space, and you may be able to pick it up on the cheap (or in my personal case, I got the space for free). Third, renegotiate with your landlord. With a soft demand for office space, landlords are becoming more and more flexible on the rent, to keep you in.
6. Interns & Differently Abled Organizations
There’s a whole workforce of talent that most companies overlook—interns and people with disabilities. They have the talent and intelligence, but not much experience. Reach out to the local colleges for interns, and in exchange for pay, work with the college to give the student much need college credits. Contact organizations that can staff you with people with disabilities. Both represent talented, hardworking people, and often at a cost that is much lower than what you are paying now, simply because they don’t have the experience. We all started there!
7. Bottom Line Responsibility
One of the most overlooked methods of radically cutting costs, without compromising the business in any way, is to seek guidance from your team. Have a company wide meeting and educate your employees on the P&L and the need to cut costs. Empower them to bring suggestions to the table and to act on them directly. One company, for instance, had an employee who suggested everyone bring in a coffee mug from home instead of using disposable cups. It saves the company $100 a month. Similar ideas were implemented throughout the company, and the company turned profitable as a result.