Creative Cost-Cutting

Think you’ve done everything you can to reduce expenses? Think again. Small business owners share 13 strategies for cutting costs when times are tight.

Consumers are keeping a tight grip on their pocketbooks. And obtaining credit is tricky. What’s a small business to do to stay afloat? Get creative with cost-cutting measures. Here’s how real-life companies are cutting back to keep up.

Look at tech expenditures. Staying up to date with the latest technology may seem like a smart business move—but is it necessary? Not always, admits Joe Knight, author of Financial Intelligence for Entrepreneurs and co-owner and CFO of Setpoint Systems Inc., a manufacturing automation equipment company in Ogden, Utah. “We realized we didn’t always need that upgrade, didn’t always need the newest equipment,” Knight says. “As long as everything is functional we can stay the course with what we have.”

Shop around. Look at what you’re paying for telephone, Internet and website hosting service. Odds are you’re forking over cash for services you seldom use and don’t really need. Identify which services are necessary, then research the best deals. Queens Harbour Real Estate Co. in Jacksonville, Fla., recently cut its phone bill in half simply by getting rid of unused services and switching providers.

Negotiate better deals. If you stick with your existing suppliers and vendors, renegotiate financial contracts whenever possible. Setpoint negotiated lower maintenance fees for its software licenses simply by broaching the subject. It doesn’t hurt to ask.

Go online. Ditch long-distance landline phone service in favor of VoIP (Voice Over Internet Protocol), an Internet service that allows you to place calls using your computer. It can reduce your phone bills by as much as 60 percent. While you’re at it, take your sales calls online using Web conferencing and Internet tools such as Microsoft Office Live Meeting.

Stop buying software. Rather than purchasing new software, Setpoint now relies on Software as a Service (SaaS), which allows the company to access frequently used computer programs online for a fee. “We realized we don’t need to own everything and we can pay monthly for the things we need,” Knight says. Save even more by checking Download.com or manufacturers’ websites to score free trial downloads, freeware and limited versions of programs you need only occasionally.

Rethink the workweek. Although it’s not possible for all businesses, consider whether you could cut some or all of your operations back to a shorter workweek. That’s what Pretech, a concrete manufacturer in Kansas City, recently did. “By closing the plant one day, the company saves money on heating and electricity. And the employees seem to like it because they’re getting their hours and they only pay for gas to come to work four days a week,” says Pretech co-owner Bob Bundschuh. He found that employees would rather cut back slightly on hours with the trade-off of maintaining health insurance and keeping their job. The employees also suggested scaling back the 2008 company holiday party—from a $5,000 offsite Christmas party to an employee-only barbecue lunch.

Outsource. Rather than hiring additional staff, consider enlisting the help of independent contractors. You won’t have to withhold or pay taxes on payments to independent contractors—and you only have to pay contractors for the hours they work, instead of full time. Setpoint now outsources as much of its tech help as it can. “We have learned to expand our staff without having to hire, so we have a smaller core of employees,” Knight says. “We’ve been pretty successful in getting the support we need without having someone on staff.” For information to start outsourcing, visit the IRS website.

Get energy efficient. Replace standard incandescent light bulbs with compact fluorescent bulbs (CFLs), turn down the thermostat when no one is in the office, shut off lights when they’re not needed and power down computers at night. All are easy moves that help save on electricity bills. Replacing lighting helped Germantown, Wisc.-based Liftco, Inc. save $110 per month.

Recycle and reuse. Rethink your purchasing habits. Recycled or reused products are better for the environment, and they can help your bottom line too. One sure-fire way to save is refilling ink cartridges rather than buying new. “You’re going to save approximately 40 percent compared to purchasing new, and the quality is very comparable,” explains Alan Steigerwalt, owner of two Cartridge World stores in Columbus, Ohio.

Consider your space. Stop paying for office space you don’t need or aren’t using. If you’re locked into a lease, can you rent out a portion of the unused space to another business? Or is it worth it to move to a smaller office? That’s what Setpoint, which currently occupies an 18,000-foot space, is considering. “We have found that when we apply lean automation principles we can get by with maybe 10,000 to 12,000 feet, so we are in the process of finding a new location,” Knight says.

Join an association. Trade and business association membership fees are worth paying when they allow access to member perks, such as competitive group insurance rates and bulk purchasing discounts.

Skip the post office. Rather than express shipping that box across town for a hefty price, consider whether you’ll save cash by delivering it in person. While you’re at it, if a supplier you do business with is located nearby, why not stop and pick up what you need instead of paying shipping and handling fees? The key is to plan multiple stops in one outing to limit the time and gas you consume.

Sweat the small stuff. It may seem silly to worry about 45-cent pens when you’re trying to keep your business afloat. But consider: If you have nine employees, and each employee misplaces one pen per week, you’re spending almost $200 a year on pens. And that’s $200 that likely could come in handy right now.

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