Want to boost your profits today? Cut your costs. That’s what cost-cutting consultants do for their clients. And, although you can hire a professional expert to negotiate with vendors and leverage the power of group discounts, there are many things you can do today to reduce recurring expenses.
“First, the business owner or executive has to set goals and decide how much they need to cut out of the budget,” says Miles Lee, CEO of Alliance Cost Containment, based in Louisville, Ky. “Then, make it clear that you want to cut expenses, not people. Next, remove as many sacred relationships as possible. If a long-term vendor thinks they are on hallowed ground, they will increase their margins.”
Act Like a Pro
Think like a professional cost-cutter looking at all your "non-core" business expenses—including printing and ink, office supplies, coffee and bottled water delivery, waste disposal, pest control, shredding, shipping, non-medical insurance and telecommunications. Tracking recurring expenses is an eye-opener because most people don’t realize when vendors raise prices.
The savings depends on what kind of business you operate. For example, Lee says his team recently helped an environmental laboratory save thousands of dollars on coolers they used to ship soil samples. “They were buying lots of coolers but they were much bigger than what they needed,” says Lee. “We found a smaller-size cooler that not only saved on shipping costs, but we got them a 20 percent discount on buying directly from the manufacturer.”
Lee also worked with a large food distribution company that had more than $13 million in annual expenses. Alliance netted $1.6 million in annual cost savings by helping the client consolidate its supply network and eliminating 98 suppliers.
And, if you think cutting costs is not your job, Lee says, think again. Leaving the buying decisions to your office manager or assistant is a mistake. “Often times, the business relationship is between the sales rep and the buyer (at the company),” Lee says. “It needs to be handled executive to executive. We connect with the top executive at the company and let them know our client is looking for and is open to moving to new vendors.”
Lee’s company, which he purchased in 2007, has 27 franchises across the country. Many franchises are owned by accountants and former corporate executives. They are compensated based on the amount of money they save their clients. “We get a percentage of the savings—generally 50 percent,” he says. “But, you are putting in hundreds of hours of work in before you can collect a nickel.”
Alliance's team reviews months of historical data from invoices and scans them into a database. “Sometimes we deploy 30 people on an assignment,” Lee says. “We have six analysts that do nothing but crunch numbers.”
Barry Johnson, a former telecommunications executive, bought an Alliance franchise in Indianapolis about two years ago. He said helping companies save money appeals to him because he has strong analytical skills and likes working with people. So far, he’s found several clients including small businesses, schools and non-profit organizations.
“It takes time to go through the data and identify the opportunities and options for the clients to save money,” he says. “It can take several months from the time of engagement to billing.”
If you want to start saving money today, here are nine cost-cutting tips I found helpful based on my years in business.
1. Look for deals. Use coupons and watch for online discounts to buy things you use all the time like printer cartridges and paper.
2. Ask for deals. Before making a big purchase, ask when the item you need will be on sale. Even big box store clerks will tell you when to buy something if you ask them nicely.
3. Keep pens from walking away. Lock the office supply closet and give one person the key.
4. Pool your resources. Ask employees to dig through their desk drawers for lost pens, pencils and notebooks. Use all the ‘swag’ you collect at trade shows and meetings.
5. Save paper. Print on both sides of the paper or use the back side for scratch paper.
6. Relinquish pride of ownership. Borrow or rent any equipment you won’t need long-term.
7. Try before you buy. Take advantage of free trial offers for software and online services before you buy them.
8. Stay on target. Make a shopping list and stick to it. Avoid impulse purchases.
9. Ban the bottles. Buy a water-purifying filter rather than bottled water.
How do you cut costs?
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