The Daily Item, Sunbury, PA

Business

June 13, 2013

Ask the Mompreneur: How to cut expenses while preserving staff

January has always struck me as a bad time for an entrepreneur to cut expenses, since to my mind, the start of a new year should correspond with new plans, fresh campaigns, and spending for growth.

Mid-year, on the other hand, seems an auspicious time to cut the fat. You have six months of operating data to look back on and six months ahead to reap the rewards of any course correction. If you think your business might benefit from some cost-cutting - and you don’t want to lay off anyone - consider these categories:

CAPITAL EXPENSES: When purchasing physical assets for your business with a useful life of more than one year, consider buying used. Ask yourself if you really need a brand-new filing cabinet, or would you be equally well-served by a previously owned one and pocketing the difference?

As with anything else, ask around for referrals to reliable vendors. You can use Craigslist to find one-time purchases or Yelp to find local businesses that specialize in liquidations for your industry or general merchandise such as office furniture.

Jennifer Moxley, vice president at Nomadic Communications in Charlotte, N.C., turns to secondhand hardware for her video production company. “We buy refurbished electronics. Hard drives, laptops, our desktops, and especially our specific media gear. In our mind, it’s like buying a new car - sometimes you lose lots of money just driving off the lot.“ Moxley scans government sales as well as sites such as GoIndustry DoveBid and MacMall.

FIXED EXPENSES: For many small businesses, the cost of their retail or office space represents one of their largest fixed expenses. If your local market for commercial real estate is soft, you may be able to find a better deal nearby or negotiate a reduced rent with your current landlord. The keys to success are to start early, well in advance of your current lease’s expiration, and to do your homework by shopping around, ideally working with a good commercial real estate broker.

If moving or re-negotiating isn’t an option and you have extra space, consider taking on a tenant. You may be able to find a freelancer who needs somewhere to hang his or her hat and who works in a complementary field.

Salaries are another fixed expense where you can hold the line by providing an attractive profit-sharing or bonus plan in lieu of raises. This approach works best for businesses where your employees feel they can positively affect the performance of the business through their personal efforts.

VARIABLE EXPENSES: Variable expenses rise and fall depending business activity, sales and external conditions. They tend to fall under two categories - consumption of goods and consumption of services. Both goods and services will, of course, differ with type of business, but office supplies and general business services are almost universal.

For pricey printer cartridges, Eileen Schlesier, business consultant and owner of Charlotte-based SleeveShirt Consulting, advises entrepreneurs to go green and save some green at the same time. “We refill our ink cartridges instead of buying new. Not only is it great for the environment, but it’s a fraction of the price of buying brand new from the manufacturer.“

For payment processing, Becca Bazzle, massage therapist and owner of Essential Therapy of Charlotte, says, “I realized the biggest recurring bill I have control over is my merchant services, so I am working with a new agent to bring that down, hopefully about 25 percent over the course of a year.“

Finally, remember to keep your business expenses in perspective. Examining your cost structure and thinking through your capital, fixed and variable expenses is an important discipline, but it is only a means to an end. Look for the savings opportunities that make sense for your business and focus only on those cuts that align to your overall strategy and market position.

Jennie Wong is an executive coach, author of the e-book “Ask the Mompreneur“ and the founder of the social shopping website CartCentric.com. Email her at TheJennieWonggmail.com.

 

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