I think it’s a shame that so many books about how to cut small business expenses are written by consultant types who never owned their own business, or last owned one 20 years ago. Which is why I turned to Timothy Gase for some real-world advice on how to operate lean right now.
Gase is the author of The Small Business Savings Plan: 101 Tactics for Controlling Costs and Boosting the Bottom Line. He is also the chief executive of Groveport, Ohio–based small-manufacturing firm Peerless Saw, which he bought with a partner 10 years ago.
Here are his tips for cutting costs:
- Pay early: Gase estimates Peerless saves $20,000 a year by taking advantage of early-pay discounts. If you’re not getting them, ask vendors if you can have a discount. Even one-half of 1 percent off can add up for a large vendor.
- Get better terms: Improve your cash flow and reduce borrowing costs by asking 30-day vendors if they’ll take 60 days. Ask if they’ll accept a credit card without a surcharge; that’ll automatically buy you 30 days more, and you can accumulate reward points.
- Look through your invoices: Read the detail on all your invoices and you’ll find small things that add up to big dollars. Gase says Peerless once leased a floor polisher for its shop on a three-year lease with an option to buy it at the end for $1. Meanwhile, the lease was bought up by another lender, Peerless changed purchasing managers, and there was no one left who remembered the original terms. Gase’s detective work ended the lease, saving several hundred dollars monthly.
- Examine the UPS bill: Gase discovered that if you enter an address incorrectly, United Parcel Service charges you a few extra dollars to correct it. Then if you send another package with the same preprinted label, you’re charged again. And again. It’s hard wading through 13 pages of billing detail, but you can find waste.
- Look down: Look at the floor, that is, and the service contract you have for cleaning. Peerless had a contract to have its throw rugs periodically changed for clean ones. The original contract called for 11 rugs, but over time, Gase’s walk-through revealed, more rugs had been added at additional cost. A comparison revealed the contract had become ridiculously expensive. “We could have replaced a whole wall-to-wall carpet once a year on the amount we were spending on these throw rugs,” he says. Gase cut the number of rugs the company used and found a less expensive vendor for rug cleaning to bring costs back down.