19 Ways to Survive in a Tough Economy. Lynn Spry

be added back later. You want to make money now, not in two years, so cut deep!

      3. Negotiate and Reduce Your Bills

      Obviously, since this list represents required business expenses, you cannot reduce your expenses in this area by simply eliminating any of these bills. However, these costs should still be reduced as much as possible so that they represent the minimum spending required on these expenses. Even if you have a contract, signed lease, or recently purchased service, there may still be opportunity to reduce your cost.

      First, review each bill on the list and each item on the bill. Just because these bills appear to be required, doesn’t mean there aren’t any extraneous expenses. For instance, check your local phone bill. Are there any services on the bill that you don’t need or use? Are there any items that can be dropped? If you aren’t using call-forwarding or three-way calling, why are you paying for it? Are employees taking advantage of your company and using your phones for personal long distance? Are you paying late fees or penalties? By reducing unnecessary line items on your bills, you can ensure that your overhead contains only necessary costs.

      Once you are sure that the bills are correct and the excessive costs are reduced, you may still have the opportunity to reduce your bills further. By researching your options and then negotiating new rates or plans you may be able to lower your costs even more.

      Lifesaver: Voice Over IP (VOIP) is one way to get phone service at a much cheaper rate. By running your phone calls over the Internet, providers are able to offer long-distance phone service for much lower rates. In some areas, unlimited long distance can be bundled with your Internet service for as little as $15 per month. This discount can add up to significant savings throughout the year!

      Next, for each of the bills on your list, contact any competing vendors. If you do not know any competing vendors, simply go online or check your local phone book. When you call, let the company know you are thinking about switching vendors. Most likely, these competitors will have salespeople available who can help you understand your current bill and your options. In order to ensure that you have the right view of the industry, make sure to get the advice of more than one company. After you have researched competing vendors you will know which provider offers the lowest prices.

      If you have found a lower cost provider, make sure to call your original company before you switch. Some companies are competitive and may offer you new enticements to stay. If you haven’t found a less expensive option, you may still have some negotiating power with your current vendor. Some business owners find that they have more options after owning a business for a few years than they did when they first started the business. Talk with the sales representatives for each bill and let them know you are shopping around. Sometimes, just bringing this to their attention may make them offer you discounts and services that could be valuable for your company.

      Of course, some industries will naturally have more flexibility than others. While your utilities (i.e., water, garbage, and electricity) may not have many competitors, they may have competing packages to review. Other industries, such as insurance, may be very flexible. Insurance, which is often very expensive for a start-up business, may actually decrease as your business continues to have a clean record. Also, the cost of a policy with a higher deductible may be much less expensive than one with a lower deductible.

      However, when incidents do occur, you will have to weigh the cost of making a claim and getting some of the money back against not making a claim and paying the costs yourself. Some companies use their insurance regularly to offset the costs of petty theft, vandalism, and damaged goods. While this may resolve the immediate problem, this may not always be financially responsible. Very often, insurance companies will raise your premiums if your company reports too many losses. Unfortunately, one small computer store we know of made four claims in one year. Theft of a laptop, accidental damage to a customer computer, customer file corruption, and a small accident on their property were all settled using their insurance. Although each claim was settled quickly and easily, using insurance that frequently eventually led the insurance company to raise the company’s premiums dramatically. Eventually, the owner closed the business as he claimed the insurance costs alone were making his business unprofitable.

      Note that we’re not saying that insurance should be eliminated due to the expense. Insurance is an absolute necessity for any small business and cannot be purchased when you need it most (e.g., just after an accident). While you should review your insurance costs your business should not eliminate it.

      Lifesaver: Call any company you pay regularly (e.g., insurance carrier, bank, and utility company) and ask about paying with direct debit. Some companies provide discounts to businesses that have automated direct debit set up. Even if they don’t offer a discount, you may want to arrange this service. Direct debit can save time on your company’s bill payments and save money by eliminating any late fees or penalties.

      Approaching your local bank may be another opportunity to reduce your overhead expenses. Banks may be more likely to extend lines of credit to businesses that can show steady sales over the last three to five years. Securing a small business loan may allow you to consolidate debt with higher interest rates in favor of a loan with a lower payment. Another possibility is that some banks may offer better services or reduced charges for companies that do all their business with one bank. Ask a bank manager about small business options and account features.

      One of the most difficult costs to change is the cost of your rent. In general, most businesses have a lease that will prevent them from moving without a significant penalty. However, in some cases it may be appropriate to consider moving. For example, an owner of a local store had noticed that improvements were being made to her strip mall location. New trees were planted, a new roof was added, the parking lot was refinished, and many other additions and changes were made. At first she didn’t think much about the new modifications; however, the landlord did get her attention when he sent the bill for all the upgrades and new features to each of the tenants. Her company’s portion of the renovation came to almost $30,000 in one month. Although she tried to work with the owner and even legally appeal the bill, her lease contract entitled him to recoup the cost of the modifications directly from each tenant. As a result, she moved her business across the street and signed a more reasonable lease with a cap on improvements and repairs.

      4. Reduce Unnecessary Employee Expenses

      One of the largest expenses for any employer is often the cost of employees. Employees often believe their cost is simply their salaries, but as an owner, it becomes obvious that salary is only one part of the employee expenses. A business owner may find that the costs of his or her employees can greatly exceed the cost of their salary. At some large Fortune 500 companies, the rule of thumb is to take an employee’s salary and double it to determine their cost. For small businesses, this multiplier may not be as high, but employee expenses will add up.

      To begin determining your employee expenses, include all employees as well as any other individual that works for your company including consultants, interns, temporary help, and bookkeepers. However, do not include yourself in this group even if you work at your business and pay yourself a regular salary. List each of these individuals as well as their salary and any other expense associated with their employment. It may surprise you how many expenses an employee incurs. The following are some employee expenses to include:

      • Overtime: Include any money regularly paid for overtime. If this occurs very infrequently, include all estimated overtime costs.

      • Bonuses and/or commissions: Include any money provided to an employee as a bonus or commission payment.

      • Employment taxes: Include the payroll taxes on each employee’s salary and bonuses.

      • Benefit premiums: Include any company-sponsored premiums toward insurance, medical, dental, and retirement contributions.