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but the following information is shared freely and is a worthwhile read if you are considering hiring a cost containment firm or an expense reduction company.
REDUCE OPERATING COSTS
Jason Smith is a former Vice President of a national Cost Containment Company that had 30 franchised offices across the United States. This website will help you reduce your own operating costs without having to pay tens or even hundreds of thousands of dollars in expense reduction fees.
- Cost Containment
- Expense Reduction
- Cost Management
- Supplier Relationships
- Procurement Practices
- Cost Management
- Cash Flow Managment
- Embrace Technology
- Request for Proposals
- Early Payments
- Cancel Unused Services
- Go Green
Follow the steps below and you could save 20% on your indirect overhead costs – without spending a penny with a cost containment or expense reduction firm!
Expected savings for indirect overhead costs
Reduce Operating Costs
Here are some ideas that your cost containment company won’t tell you!
Many small and mid-sized businesses work on tight margins. Consequently, small and mid-sized business owners are frequently looking for ways to reduce their operating costs without resorting to a lower quality of their offering or making the lives of their employees miserable or more difficult.
So, what are the best ways to reduce operating costs? Below are eight ideas that can help you reduce the operating costs for your small or mid-sized business and enable you to generate more revenue whilst reducing your overhead expenses.
1. Reduce Operating Costs by Embracing Technology
There are many online systems and software programs that have automated most every aspect of small business functions. Accounting, Website Hosting, Marketing, Communications, Payroll departments and more can benefit from programs and services that make it easier to manage many facets of your business.
In order to choose the right program or service for you, ask yourself the following questions:
- What do I know how to do? I mean what do I know really well? (e.g. If you were an accountant in a former life, then outsourcing your finances really may not be the best thing to do.)
- What do I find myself spending an incredible amount of time each day?
- If I could take one of my most time-consuming tasks off my plate, why wouldn’t I do that and what would it be?
Hopefully, your answers to the above questions will give you a better indication of the tasks or subject matter areas that you should rely upon technology for. Not all areas need additional technology, but automation reduces time and time is money.
2. Reduce Costs With Outsourcing
Instead of relying on technology, the best way may be to shift responsibility of some of your business practices to another business or even a consultant. One area that could benefit the most from outsourcing is advertising and marketing. For many entrepreneurs, this can be a pain point. Entrepreneurs often find that the amount of time they spend on advertising and marketing simply does not correlate to the best return on investment. Put simply its all about what areas are you most proficient in?
Whilst it might seem that hiring an outside vendor would result in spending more money, in reality, in the long run, delegating certain tasks to subject matter experts will save you money and will usually generate even better results. Subject Matter Experts are a favorite of Cost Containment Companies. If your job is to buy office supplies and you have been doing it for the last ten years then you probably know that industry well, you probably know why the price of paper fluctuates and what factors influence that. By simply outsourcing some areas you will often get the Subject Matter Expert and they can help you reduce your overhead costs.
3. Lower Operating Costs by Shopping Around
If you work with the same vendors on a regular basis, one might want to set up a bidding system for both projects and every day work. If you ask three different vendors to provide costs to you, then you can use the returned bids to get better pricing. You can do this yourself, it doesn’t need an outside contracted third party who will charge you a fee, to do this. Yes, increasing your buying power will result in lower prices, but in reality it may not be be sufficiently low to justify additional cost containment fees. You negotiated a 10% reduction in fees? Great. Stick with that – at least for the time being and allow 10% to flow to your profit line.
It’s important when asking for bids that you determine what you want them to do for you before you ask for bids. Best practice suggests that you compile an accurate scope of work or request for proposal (RFP) for the vendors to bid on, as missing information or added complexity can greatly affect the quoted rate. RFPs aren’t as complicated as many cost containment companies will lead you to believe. By asking say 3 different companies for pricing of a widget you are submitting an RFP. Thats it! If 1 company offers you a price that is 15% less than you are currently paying and the purchasing of that widget is half of a particular expense category then you have saved 7.5% in that category.
4. Telecommute to Cut Down on Costs
Leasing an office space, paying for utilities and simply managing an office can place a drain on your financial resources. Whilst for most businesses this is a real necessity it does not apply to all businesses. Sometimes – if it makes sense, allow your employees—and yourself—to telecommute. Even if this is only once or twice a week. With the amount of connectivity available today, the difference between an employee sitting and working in an office and sitting and working at home is often almost indiscernible. Employees will typically also find this advantageous – and preferable – as they will be able to cut down on their own commute times and expenses. For office supplies alone you would save an average $200 per person per year and $1,000 per person in a law firm. (according to lac-group)
5. Pay Invoices Early or On Time
Here is something that seems obvious but many organizations simply don’t utilize it: many vendors will offer a discount if you pay your invoice early. So if cash flow isn’t an issue then consider this an option. Even a savings of two or three percent can really add up – and I mean really add up!!! At the very least you should make sure that, if possible, you pay your invoices on time in order to avoid any late fees or other penalties. Lets add another 2.5% savings that we identified above.
6. Identify Inefficiencies to Decrease Costs
You should always be looking for ways to make your business more efficient. By tightening up your processes and procedures, you can reduce waste (both materials and time) and therefore, decrease costs.
Empower your employees to look for inefficiencies and identify ways to save time and money. If and when employees pitch ideas to you, don’t forget to pay attention. You don’t want to waste money because you weren’t willing to listen. Trust me on this, employees usually love to tell their team leaders where savings can be made. They have a vested interest in this – not only do they look good by doing so, but savings within their department secures their job.
7. Cancel Unused Services
This may seem like a no-brainer, but it’s easy for unused services to continue to be deducted from bank accounts or charged to credit cards if you’ve left them on auto-pay. Take a look at all of your expenses over the past six months. If you haven’t used a service in 90 days, cancel it.
It might also be time to reevaluate the services you do use, so shop around for a cheaper alternative or use the occasion to renegotiate your existing contracts.
8. Go Green to Reduce Operating Costs
If you do have an office space, consider making it as green as possible to reduce energy usage. Replace regular light bulbs with compact fluorescent lighting, look to reduce heating and cooling costs by improving your insulation and windows, and cut back on the amount of physical waste. Encourage employees to communicate via email or other electronic means if they don’t already do, and ask your vendors to do the same. This can drastically decrease the cost of your monthly office supply order.
Cutting operating costs for your small business isn’t impossible, but depending on how comfortable you are working within a lean budget, it can take some getting used to. Don’t be afraid to spend money on the services and people you really need, but take an extra moment or two to consider the long-term cost of ongoing services or expensive technology.