When you look at the year ahead, here are 7 simple ways to save $100,000 or more by reducing your company's expenses. This is money that will drop directly to your bottom line enhancing your profits and giving you more cash to grow in the coming year.
#1: Consolidate your purchases and negotiate better pricing.
One exec we work with saved her company over $100,000 a year on their $1 million per year direct mail budget by consolidating their print and mailing house services to one company.
Also, remember that reviewing your key vendors is especially important for companies that have gone through a recent burst of growth. We often we see companies paying prices based on purchase volumes that they far exceed.
Also, check around your community for local buying organizations that gather all the local businesses in the area and use their collective buying power on behalf of all the members.
One of our business coaching clients is part of an informal wholesaler network that negotiates collectively with a large group of product manufactures in their industry to both get collective better pricing and larger rebates on their sales. This one strategy has added over $1.2 million of profit to their business over the last 36 months.
#2: Get vendors to compete for your business.
Make sure they know about each other, without rubbing their faces in it.
It's amazing how much better your pricing can be when your vendors feel the hot breath of their competition on their necks.
Even if you plan on staying with your current vendor, the very fact that you know and they know that you're getting outside bids will keep their pencils sharp and help ensure you get better pricing.
Take the time to plan out your negotiation strategically. Create competition for your dollars. Create a list of concessions you want, with extras for you to trade off. Research the market to better understand the best deal you can expect. Even hire an experienced negotiator to help you make the purchase on the best price and terms you can. If the asset you're buying for your business is large enough, the ROI on your negotiation work can be immense.
#3: Train your staff to ask for and get discounts.
A short negotiation course on how your team can get discounts from your vendors, plus consistent recognition for team members who do this, pays off handsomely in increased cash flow. This practice alone could reduce your variable expenses by 5-10 percent.
For example, Daniel, the operations manager of one of our long-time business coaching client saved his company $140,000 by renegotiating key contracts in his first 12 months after attending our negotiations training.
#4: For creative and interesting work let intrinsic rewards rule.
Be wary of over-incentivizing for specific behaviors. Autonomy, challenge, and pride are multiple more powerful and enduring rewards than an outside piecework bonus structure for expert work.
#5: Regularly review your administrative and operational staff levels closely.
Most service and administrative departments can be cut by 1 in 4 with no impact on quality of work. Many can handle 1 in 3 cut with no significant negative impact.
#6: Cut back on the physical space you use.
One medical group we coach reduced their third location by 50 percent with no adverse impact to revenue. This turned a break even location into a six-figure profit center.
#7: Put every NON-Strategic expense on trial - and presume it is guilty.
In other words, put the burden of proof is on the item to justify why it should be spent. No justification? Dump the expense.
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If you enjoyed the ideas I shared, then I encourage you to download a free copy of my newest book, Build a Business, Not a Job. Click here for full details and to get your complimentary copy.