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5 Ways to Help Cut Costs While Adding Quality

Cutting costs doesn’t have to mean angering employees or producing lower-quality work, if you’re honest about figuring out your inefficiencies.
September 30, 2016

Back in the 1990s, NASA adopted a slogan, "Faster, Better, Cheaper." It's a formula many small-business owners would like to follow in their daily operations even today. Who wouldn't want to have a more efficient operation while cutting costs?

"Cutting costs doesn't need to mean a decrease in pay rates or benefits ... [or] the degradation of a product or a service," says Karen RJ White, a professor of project management at Marlboro College in Marlboro, Vermont, who has worked with corporate and nonprofit organizations worldwide. "It might mean the business can be more effective, more efficient in the generation of that product or service. It might just mean the business recognizes it can't do it all. This in turn frees up resources for other things."

Here are some ways business owners and experts suggest trying to cut costs while adding quality.

Reduce Your Overhead

Cedric Savarese, CEO of FormAssembly, which allows customers to build, design and manage Web forms, realized that by hiring remote employees, he could add both quality and cut business costs.

By being able to hire anyone from anywhere, he had access to a much more diverse talent pool instead of only employees where FormAssembly is headquartered: Bloomington, Indiana.

"At first, we had concerns about long-distance collaboration and keeping employees motivated and productive—but in the end, having access to talented people was the deciding factor," Savarese says.

Suppliers work with many brands, so they often have solutions and ideas, even without giving up anything proprietary in the process.

—Lance Vaught, director of operations, Penn Station East Coast Subs

He made his first hire—his business development director who lives in Toronto—in 2012. He now has 11 employees who work remotely, from places as far-flung as Australia and Alaska.

At first, Savarese had some difficulties. "It was initially quite a hassle managing payroll in multiple states and countries," he says.

But he started seeing the financial benefits after a while, as he realized how much he was saving in office space, parking costs and furniture.

He has 14 people working at their Indiana headquarters and estimates he's saving $25,000 a year by having 11 employees located elsewhere. That $25,000 a year, Savarese claims, has been able to go into additional marketing for the company.

He's also saving money in other ways. "By hiring remotely, you don't have to worry about running out of office space, hunting for new space or the expenses associated with getting out of a lease early," he explains.

Talk to Your Suppliers

Lance Vaught, director of operations for Penn Station East Coast Subs, a chain of sub sandwiches headquartered in Milford, Ohio, with hundreds of franchises in the Midwest and South, says he and the top management meet with their suppliers on a regular basis to gather ideas and best practices from them, and sometimes pick up strategies that let them cut costs and add quality.

"Suppliers work with many brands, so they often have solutions and ideas, even without giving up anything proprietary in the process," Vaught says, adding that suppliers are constantly innovating.

Vaught notes that one year, one of their suppliers came up with a customized product that they now use on a daily basis. "Not only did this lead to better tasting food in our restaurants, but we now get twice as much use out of the product for the same price as we were paying before," he says.

Outsource

Taylar Barrington is based out of Madison, Wisconsin. She has Taylar Barrington Creative Agency, a marketing and advertising agency, and she started MaverickHill, an online retail clothing store aimed at empowering college women.

Barrington says she initially had her MaverickHill inventory at her business headquarters and was warehousing much of the product, which was getting costly.

"Initially, we were making about 66 percent on the cost of each shirt sold," Barrington says. But it wasn't long before she realized that most of her sales came when she began offering discounted merchandise, and her profits began plunging.

"We were forced to run a lot of sales in order to move the stock quickly," she says.

She started using a fulfillment center, which took care of warehousing and shipping for MaverickHill. Since Barrington only paid them when she got an order, she no longer juggled storage costs. Her upfront costs decreased, and her cash flow improved. 

Bring Work In-House

But outsourcing isn't always the answer. Some business owners may find they can cut costs and improve quality by not outsourcing.

Jon Berry works as a graphic designer for television, based in El Porto, California, but in November 2014, he started a small side business, OsoPorto.com, which sells beach and surf-themed T-shirts, posters, mugs and other gifts.

"I was using my T-shirt printer to do the fulfillment of shirt orders in an effort to keep the side business as hands-off as possible," Berry says. "Last month I decided I couldn't continue to support that cost, so I brought that in-house to do it myself."

While he's saving money, Berry also feels he's adding quality to his customer service. He has been adding a pre-printed thank you card and other little trinkets along with the merchandise customers buy.

Berry acknowledges he's spending more time fulfilling orders, but he's saving actual money (35 percent more profit per T-shirt and hoodie), and he adds, "Hopefully, the personal touch will make a difference to some customers."

Cutting costs while adding quality is often about eliminating any time or expense that's slowing down how your business runs, according to Brian Porter, a professor of management at Hope College in Holland, Michigan.

"Any waste in the system," Porter says, "could be considered a quality problem."

 

For more tips on planning for business growth, access our exclusive guide from LegalZoom CEO John Suh, Move Your Business Forward.

 

Read more articles about saving money.

A version of this article was originally published on September 30, 2015. 

Photo: iStock