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.
In other words, put the burden of proof is on the item to justify why it should be spent. No justification? Dump the expense.
RELATED: 6 ways Americans waste money
6 ways Americans waste money
6 ways Americans waste money
1. Overspending on Education
The U.S. spends more on student education each year than most other countries, according to a 2013 report by the Organisation for Economic Co-operation and Development. Yet despite spending more, American students don’t perform as well on test scores.
Furthermore, college tuition continues to climb in the U.S. and family income hasn’t kept up, according to a recent report from The College Board.
Choosing to stay inside your home state for college can be a smart move for your pocketbook. Average in-state tuition and fees at a public university is $9,650. You’ll pay more than $15,000 to cross state lines, with average out-of-state tuition and fees at public universities at $24,930. Meanwhile, tuition and fees at private colleges averages $33,480.
If you really don’t want to waste money, consider community college, said Timothy Wiedman, a retired associate professor of management and human resources at Doane University in Crete, Neb. The average cost of in-state tuition and fees at a community college is $3,520.
“Completing a two-year transfer program locally while living at home — andthentransferring to a more expensive four-year school to complete a bachelor degree — will often save a great deal of money,” he said. And the coursework will be virtually identical, he added.
2. Purchasing Expensive Diapers
Diapers are a messy business, and an expensive one for parents. According to Babies R Us, a baby will need up to 3,360 diapers in the first year of life. If you spend an average of 25 cents per disposable diaper, that is $840 for the first year.
Diapers are a necessity when welcoming a new life into the world, but don’t use them longer than required. “People waste hundreds, if not thousands, of dollars by believing that children need to wait until certain things happen before they can potty-train their children,” said Michelle Swaney, owner of The Potty School, where she teaches people how to toilet-train their children ages 18 months and up.
In fact, the U.S. lags in toilet-training when compared to some other parts of the world. For instance, Vietnamese babies are usually out of diapers by 9 months of age, reports NPR. In the U.S., the average age for a child to be toilet-trained is somewhere between 24 and 30 months, which is a conservative estimate, according to Swaney.
America wasn’t always so bad at teaching the bathroom habit. In 1957, 92 percent of children were toilet-trained by the age of 18 months, according The New York Times.
A baby registry checklist often includes every gadget imaginable for infant care. Just for starters, you’ll need a diaper pail that collects dirty diapers, and a bottle warmer that warms milk.
According to the book “Baby Bargains” by Denise Fields, a baby will cost your household an average of $7,000 in the first year alone. With a price tag like that, it’s important to spend money wisely.
So, stick to buying only what is necessary. For instance, do you really need to purchase a Playtex Baby Diaper Genie Complete Diaper Pail at Target for $34.99? Or could you just simply recycle grocery bags to bag up and quickly dispose of dirty diapers?
The same holds true for a bottle warmer. You can warm up a bottle by simply using warm water. And do you really need a specialty baby-food maker, when a regular blender will do the trick?
4. Betting on Lottery Tickets
We all have dreams, but spending cash to become a millionaire shouldn’t be one of them. Americans spent $73.8 billion on lottery tickets in fiscal year 2015, according to the North American Association of State and Provincial Lotteries. A quick look at the Powerball website tells you the odds of winning the lottery grand prize are 1 in 292,201,338.
Even if you win the lottery, you have to wait to be paid. You also fork over taxes, which can drastically reduce your winnings. Some people believe only the poor play the lottery religiously, but a study in Virginia found that 55 percent of people who play at least once a month have an income of $55,000 or more.
Instead of wasting money on lottery long shots, spend the money on something that’s attainable — such as a dinner out. At least spending in that manner allows you to enjoy yourself.
5. Failing to Shop for Bargains
Never shop without scoping out discounts and deals first. Fail to do so, and it’s basically like leaving free money on the table — which, of course, is never the smartest idea.
“Although today’s online shoppers are very savvy, many do not take advantage of free money, such as cash back,” said Brent Shelton, an online-shopping expert at FatWallet. For example, you can earn cash back by shopping through sites such as Ebates, and many credit cards offer cash-back rewards on purchases, he said.
Savings add up when you take advantage of incentives such as these. Missing such opportunities can leave you feeling cash-strapped sooner. In addition to Ebates, other sites that offer promotions such as cash-back deals include:
Don’t forget to check out individual store saving opportunities too. These include the Cartwheel app at Target and Yes2You Rewards at Kohl’s. Check details of your credit or debit card for other saving and earning opportunities.
Your wedding day is supposed to be the best day of your life, so spend a fortune, right? In fact, Americans spend a ton to say “I do” — a record-amount average of $32,641 in 2015, according to the latest survey from The Knot.
Europeans on the other hand, are much more conservative with wedding expenses, spending an average $5,495 on nuptials, according to a survey by ING, the Dutch-based multinational and financial services firm. Europeans would rather spend money on a house than a wedding, the report found. That does make more sense financially than spending cash on an occasion that’s here today and gone tomorrow.
So, how can you save thousands on your wedding? Think smaller — reduce the guest list, buy fewer flowers and settle for a smaller diamond.
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