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Keep A Tight Watch Over Daily Outlays

Your business is up and running. Now, it's all about getting right to work on the daily operations that will yield the profits you seek.

At this stage, many entrepreneurs focus their attention on the profit centres, and tend to neglect the backend of the business: daily operations. The common belief is that this part of the business will run itself. This may be true, to a certain extent. Experienced entrepreneurs know that unless someone accountable keeps a keen eye on the bottom line, operations could very well eat up whatever profits there are.

Adhering to a strict operational budget is a wise practice for any fledgling business. While certain expenditures will be necessary to ensure the smooth operation of a company, measures may be taken to see to it that these cash outlays are efficient. Keep an eagle eye on your business' regular operational expenditures, and you make a direct, long-term contribution to the profits.

While everyone acknowledges that a substantial amount of business capital has already been spent in establishing and setting up the business, few remember that regular operational expenses can also add up. Savings should be made wherever they can be, and measures should be taken to make all expenses efficient. This applies to cash outlays both from the onset of the business as well as in the daily and monthly operations.

Minding Your Money From The Start

Let's face it. Starting up a business is not cheap. The reason why few businesses make a profit in the first year, is not because the business isn't running smoothly. It's because the company has to make up the start-up losses incurred. This is why the best strategy for any entrepreneur is to minimise the costs of setting up the business from day one.

Experienced entrepreneurs advise that you start out simple and you start out slow. Consider the barest minimum you need to run the business, and try to run it on less than that. Fend off accusations that you are "cheap" by promising to make accommodations and changes once the business is in the clear.

Office Space

It can be tempting to spend money on what will be considered the home of your business, but regrettably, office space is one of those areas where even the most savvy businessman can go overboard. There are a number of ways to cut costs on office space; it's simply a matter of choosing which method works best for your business.

A dotcom company began operating out of the home for the first few months. Later the company moved to serviced offices while searching and finally finding the right rental property at Raffles Place. Staggering expenditure in this manner can be a means of minimising cost, at a time when there are a multitude of other expenses to consider. You can always upgrade once your business becomes profitable.

Another way to conserve expenses is to base your business away from the main thoroughfare. Says one businesswoman, "I ran the business out of my home at first, because I didn't want to rush into any costly leases until I had some profit. This also allowed me to comparison-shop and negotiate an advantageous lease on office space that I really wanted."

Hiring Employees

Some new businesses make the mistake of hiring too many executive types at the managerial level, and not enough lower level employees. The thinking is that the experienced personnel will take the business further and faster. The result is a top-heavy organisation that is pulled in multiple directions. More important, because these professionals inevitably cost more, your business is forced to make larger investments in terms of human resources. Consider very carefully the kind of talent you need for your business. "I always hire fresh graduates and then train them to fulfil at least two separate functions," says a veteran entrepreneur who has owned and operated a number of successful businesses that he has gone on to sell at a profit. "You get more bang for your buck this way, and you have a staff that you can count on, whatever the job requires." He notes that hiring upper-level managers becomes more important, once the business has grown and developed. "At this point as well, you're in a better position to pay the larger salaries."

Streamline Operations

Concrete ways of saving: instead of taking out separate lines for telephone, fax machine and if applicable, Internet connection, consolidate your phone and fax lines by using a telefax machine. Get your office equipment at a discount by availing of liquidation sales and companies selling their second hand appliances. However, make sure these are in good working order. Says Robert Sullivan, author of The Small Business Start-Up Guide, seemingly insignificant items can add up to major savings for your business.

Quite a number of thriving businesses have found that the Japanese Just-in-Time (JIT) concept for stocks or what's sometimes referred to as "stockless production", has proven to be a good way to economise, particularly when it comes to business operations. The philosophy behind JIT is that ordering costs can be reduced. Daily meetings, exposing problems and revealing bad practices, reducing and thus taking away the "security blanket" of buffer stock - all of these are essential to the practice of JIT.

Negotiate Everything

First and foremost is negotiating everything. This includes all the goods and services you secure for your business. Always request a discount. If you have been purchasing similar goods from the same vendor for a few months, put your regular order up for bid with the competition.

Never rush into purchases, but consider all your options carefully. As in any kind of shopping, there is a range in cost for everything, and you want to make sure that what you're paying is in the lower range rather than the higher. Buying in bulk sometimes lowers the cost. It's also wise to leverage the bargaining power of larger organisations which have established partnerships with merchants. For example, American Express Small Business Cardmembers are able to avail of discounts in travel, entertainment as well as office equipment due to these tie-ups.

Make Partnerships And Exchange

Negotiating exchange deals is a good way to help your cash flow. Where two companies come to a mutual agreement by providing each other with a needed good or service, significant savings can be achieved. Examples of this are getting free advertising space in exchange for a service. A new business can also make strategic alliances with more established businesses and save money in the long run.

The owner of a small publication wanted to take his product online, and met up with a company that had similar interests. The result was that the company agreed to host the small publication on its Web site.

Monitor Energy, Phone, And Office Supply Consumption

This seems very obvious but is often neglected by busy managers. Keep an eye on monthly bills to find an average consumption, and be vigilant about keeping to those levels. Simple reminders, on a weekly or monthly basis, should do the trick.

As far as telephone service is concerned, shop for the best rates available as these vary considerably between suppliers. Moreover, rates change frequently, so shop around from time to time and make switches if necessary.

Forget Snail Mail And The Fax, Use Email

Be a new economy business and use email. You will save on the cost of postage, paper, envelopes and mailing time. You will be more environment-friendly too! Deliver internal messages in person instead, and take advantage of the personal touch.

Once a tighter rein is taken on simple operational expenses, you will find that you have eliminated the high costs that you have become accustomed to. What's more, if your staff knows that keeping operational costs low is a strong priority, they will act accordingly. All it takes is investing some time and making the savings dynamic intrinsic to your business culture.

"This article was contributed by Christopher Lai, Director-Head of Business Development, Small Business Services, CSG, American Express International Inc."

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