Are Your Profits Going Up in Smoke?

You could be $10,000 richer at the end of 1997 without making a sale. How? By examining your business for excess spending and overlooked opportunities. You don't have to be a miserly manager to save money. This guide offers more than 50 suggestions to help you pocket more profits.

Last year, Gerry Inglesby evaluated his distributorship's method for delivering products to customers and decided to make a few internal changes. The changes will save the company $25,000 a year, estimates Inglesby, president of Toucan Business Forms Inc., Lanham, Md.

Previously, a local delivery service transported products from Toucan Business Forms' warehouse to customers. The company charged the distributorship a flat rate of $31 per day for pickups. Then, it charged a per piece fee and additional fees if cartons were delivered directly to a client's office rather than to a receiving dock. Inglesby decided his full-time warehouseman could handle deliveries more economically.

The warehouseman's schedule was altered to accommodate deliveries. Rather than work eight hours a day, he now works from about 7 a.m. until 5 p.m. Also, Toucan purchased automated shipping software that saves the warehouseman additional time, allowing him to make deliveries in the morning. In the afternoon, he handles UPS shipments, stores products and pulls products for the next day's deliveries.

The warehouseman makes about six deliveries a day using a truck he leased. "By having him lease the truck, the responsibility is on his shoulders," says Inglesby, who owned a delivery truck at one point, but had problems with irresponsible drivers. The warehouseman gets paid by the number of cartons he delivers and receives a certain fee depending on whether he takes a package into an office or delivers it to a dock. He still makes his hourly wage as a warehouseman.

Inglesby says this arrangement has several advantages. "In a sense, [the warehouseman] is his own small business getting paid on a piece rate," he says. "It's to his advantage to work hard." The warehouseman earns about 50 percent more now and enjoys having expanded duties, says Inglesby. And Toucan will save about $25,000 this year.

Not all companies can find ways to save thousands of dollars. But most should be able to reduce expenditures to some degree. When Doug Potts, CFC, bought a pager three years ago, he skimmed more than $100 off of his monthly phone bill. "I used to spend between $470 and $560 a month on my two cell phones," says Potts, owner of Select Business Systems in Torrance, Calif. "Now I'm down to about $325 a month." Rather than providing customers his car phone and portable phone numbers, he gives them his pager number. Potts says he returns calls within two minutes, so clients still receive prompt attention. His top-of-the-line pager cost about $250, and he incurs a monthly charge of about $15 for an unlimited amount of beeps. But this is significantly less than his previous cellular phone charges.

"Saving money on expenses is by far the best way you can add more profit to your company," says Peter Bond, vice president of Alpha Business Forms Inc., a distributorship in Tallahassee, Fla. "A lot of people think you have to add sales to increase profitability. That's important, but it's far easier to cut expenses." It not only takes time and money to make a sale, says Bond, but there's a price to pay after the sale-increases in paperwork and order handling associated with new sales.

To save your company money, whether it's $10 a month or $10,000 a year, examine all facets of your company with a critical eye. Many money-losing practices seem minor-a few discarded sheets of letterhead, an extra call to an out-of-state supplier or leaving the lights on in the restroom. But they add up. Consider the bottom-line result of squandering a mere $4 a day in the standard 251-day work year: $1,004 in lost profits.

Most people aren't aware they're wasting money. To find out how you can pinch pennies, consider the following areas of your business. If you implement just a few of the ideas in this article, you'll have more money when you ring in 1998.

Deliveries, Shipping and Mailing
About a year ago, Dan Roman examined his local delivery procedure and decided his distributorship spent too much money on UPS shipments. Centurion Business Forms Inc. in Coplay, Pa., used its own truck for many local deliveries, but still shipped about two packages a day via UPS to clients within driving distance. At about $6 per box, Roman thought he was wasting money. Now Centurion delivers products throughout Pennsylvania's Lehigh Valley three days a week. The driver plans the most efficient routes to preserve gas and prevent wear and tear on the truck. UPS still delivers products to customers in New Jersey, the Pocono Mountains and other distant locations. By using its truck for all local deliveries, Centurion avoids about $60 a week in UPS charges.

Other tips:

• Save on excess postal costs by cleaning up your mailing lists. The U.S. Postal Service will clean up mailing lists provided on a diskette free on a one-time basis. The cleanup includes correcting wrong or misspelled addresses, eliminating duplicate addresses and adding ZIP+4 codes to all addresses. Contact the National Customer Support Center at (800) 238-3150 for more information.

• Bar code your mail and receive low discount rates.

• If you're considering buying a postage meter, check out introductory specials, says Terri Lonier, a small business expert and author of The Frugal Entrepreneur, a collection of tips for managing resources. Many companies offer a 90-day free trial to test equipment. You could strategically plan a big marketing mailing during this time and save money.

• Check the calibration of your office postal scales against the ones at the post office, recommends Lonier. Even a slight variance can result in wasted postage or returned mail for insufficient postage.

• Compare prices for small package delivery. While UPS previously dominated the market, in the past few years other viable competitors have emerged. The Beacon Research Group published a Business Consumer Guide on shipping that cites three main companies that compete nationally for small package delivery: UPS, the U.S. Postal Service and Roadway Package System, a small package division of the trucking company Roadway Express. According to the Business Consumer Guide, if you send a lot of packages, negotiate a discount shipping contract with a single carrier. For infrequent shippers, use whatever carrier is best suited for the package you're sending.

• Examine options for next-day delivery. Alpha Business Forms previously used FedEx for next-day deliveries. The company charged about $14 per package. Now the distributorship uses Airborne Express, which charges Alpha Business Forms $7.75 per package. Bond says his company sends about eight next-day packages per day, so it saved $50 daily, or $13,000 a year.

• Drop off overnight packages at authorized shipping sites. You can save on standard pickup service fees.

Financial Management
Many strategies for managing your money have multiple benefits. Warren Jefvert pays bills with a Visa card affiliated with Northwest Airlines' frequent flyer program and simultaneously racks up free air travel, maintains personal contact with his sales reps and saves on paper processing. Jefvert, president of Lancer Ltd., says his Spokane, Wash.-based distributorship pays numerous suppliers via credit card, including its copier supplier, an envelope vendor, a packaging company and the telephone company. He uses the free plane tickets to attend industry meetings and visit Lancer's sales reps in other regions. Another benefit: "You don't have to cut as many checks," says Jefvert, "and the accounting is a breeze." Lancer saves on postage, paper processing and other administrative costs.

Additional tips:

• Investigate special offers extended by financial institutions. Occasionally, they offer loans or credit lines at reduced interest rates or without setup fees. Also, develop a solid relationship with your bank manager, who has the authority to lower rates, waive fees and arrange other special deals.

• Review bank fees on a regular basis, suggests Constance Hallinan Lagan. She is president of The Entrepreneurial Center for Small Business Development in North Babylon, N.Y., and an expert on growing a business. Are you paying too much for monthly maintenance, check writing and other services? You may save money by switching banks or negotiating lower fees with your current bank.

• Lonier recommends establishing a credit line rather than getting a traditional loan. A credit line is a "pool" of approved money waiting in reserve. It doesn't start accruing interest until the funds land in your checking account, and you can access a portion of the credit line rather than the entire lump sum. This means you can save considerably on interest charges and have flexibility in your financial planning.

• Pay bills on time. "Prompt pay discounts are a great way to save money in this industry," says Bond of Alpha Business Forms. "Some vendors offer a 3 to 4 percent discount." Most of Alpha's vendors that offer a discount require payment within 10 days of the invoice date. Bond says these bills "go to the top of the stack" and are paid immediately. An added benefit, says Bond, is vendors are appreciative and often provide better service or help him when he's in a bind.

• Rather than spending extra money to get a corporate credit card, designate one of your existing cards for business. If it is used for business purposes only, the credit card's annual fees are tax-deductible as a business-related expense.

• The Frugal Entrepreneur encourages business owners to track the monthly closing dates of each credit card billing period. Select cards with a grace period-ones that accrue interest starting at the end of the billing period rather than on the purchase date. If you make charges early in the card's monthly cycle, you get "free" rental of the money several weeks before the bill becomes due.

• If you are searching for office space to lease, The Frugal Entrepreneur recommends talking to property owners, not leasing agents. Agents are paid a commission on the rent and follow set guidelines from property owners. Owners may negotiate a deal.

• If you are negotiating an office lease, offer a letter of credit or other collateral instead of a security deposit. You can save a 3 or 6-month deposit, for instance, if a landlord will accept credit guarantees. Many landlords don't want to bother handling security deposits.

Marketing
There are numerous free marketing tools you can exploit. "Utilize all public avenues of marketing available," says Lagan. She recommends the following strategies:

• Send press releases about new employees, anniversaries, relocations and expansions, new product offerings and other news to local newspapers.

• Look at the Working Press of the Nation in the reference section of your library. This guide lists journalists alphabetically according to the subjects they cover. Lagan recommends sending promotional material about your company to journalists who write about your area of expertise, whether it's commercial printing or workflow re-engineering. When they cover the topic, they may call you as an expert source.

• Network at trade association functions. "Companies in the printing industry have something to offer everyone," says Lagan. "Attend meetings for women's groups, entrepreneurial groups, professional secretaries-any group you want to target." For a list of associations that serve your niche market, check out the reference books National Trade and Professional Associations or the Encyclopedia of Associations.

More tips:

• Use your fax sheet to market your company. Rather than simply including your name, number and address, add a brief line about your company's specialties or a Product of the Month you're featuring.

• Ask satisfied clients to provide testimonials you can use in sales presentations. Many distributors say they get most clients by word-of-mouth. Make the most of rave reviews by incorporating them into your marketing materials.

• The Frugal Entrepreneur suggests attending charity events and fundraisers. You may meet a business contact there, and your ticket may be tax-deductible.

Office Equipment
It can be costly to fill an office with the necessary equipment and furniture. According to The Frugal Entrepreneur, if you're looking for new furniture, including desks, chairs, computer workstations, filing cabinets and wall dividers, avoid the office furniture store. Instead, check out your local newspaper for a business liquidation or auction, generally advertised on the weekends in real estate or business sections of the paper. Businesses that are relocating or closing often sell furniture at rock-bottom prices.

But more important than chairs and desks are two common pieces of office equipment: fax machines and photocopiers. Here are some economical tips for those office workhorses:

Fax Machines
According to a Business Consumer Guide on fax machines, if you fax more than 80 pages a day, you could save money by purchasing a new machine. Since older machines send faxes at slower speeds, you may be adding several hundred dollars a year to your phone bill. The added charges may be more than the price of a fast, new fax machine. Other tips for fax usage:

• Cut out cover sheets whenever possible. Instead, attach a self-adhesive note to the bottom of faxed correspondence. The cost of faxing extraneous cover sheets adds up.

• Examine the cost of supplies. J.I.T. Printed Products, a distributorship in Charlotte, N.C., uses recycled ink jet cartridges for its fax machine. Office Manager Wanda Esposito says the recycled cartridges cost $8 less than the new ones the distributorship previously purchased. The company uses about one cartridge per month, so it saves $96 a year. "This is something we have to use, so we might as well save a little money," she says. The company that supplies the cartridges sends a courier to pick up empty cartridges and delivers refilled ones, so the process is hassle-free, says Esposito.

• According to the Business Consumer Guide, if you receive only a few faxes daily, you can save money with ink jet or thermal paper printing machines. However, if you receive a lot of faxes, your best bet is a laser printing machine.

• Consider a fax machine with a delayed transmission feature. It reduces phone costs by sending non-critical faxes after hours when phone rates are lower.

• Use your computer fax modem. It is generally a lot less expensive than using a fax machine.

Photocopiers
"The key to saving money is to shop around," says Esposito. "There's so much competition. It can benefit you." Previously, J.I.T. Printed Products had a 3-year lease on its copier. It paid $184 a month for a service agreement, excluding supplies such as paper and toner. Esposito found a smaller company that offers the same copier. She signed a 2-year lease with a $90 monthly service fee, including toner. The new company is based in the same city as J.I.T. Printed Products, while the former company was located out of state, so Esposito says the distributorship now receives better service.

Esposito recommends signing the minimum lease offered on copiers. If you sign a longer lease, she says you may receive a discount, but you're obligated for the entire lease period. If a better deal arises, you're stuck. A Business Consumer Guide dedicated to photocopiers offers the following suggestions for purchasing or leasing equipment:

• Replace photocopiers about every five years. Older copiers become increasingly expensive to maintain, and newer ones require almost 30 percent less scheduled service than models even a few years old.

• Receive price quotes from dealers for copiers, service contracts and supplies. Most companies purchase all three components from one dealer. However, you can purchase them separately. If you let dealers know you are considering alternatives for service or supplies, they often drastically reduce the price of these higher margin items.

• If you're buying a copier, negotiate the price. Overall, you should expect a 15 to 30 percent discount off the list price. You may receive greater discounts on older or discontinued models, or if you buy multiple units.

• Don't be fooled by low priced service contracts. Closely examine a dealer's policy in three areas: emergency repairs, routine maintenance and future costs.

Personnel
Whether your company employs a staff of 30 specialists or relies on three people to juggle 30 tasks, make sure all employees work to their maximum potential. Sometimes, this may mean looking outside the company for help. Centurion Business Forms frequently subcontracts typesetting. A data processing employee handles about 80 percent of the typesetting. But when this employee is bogged down with other work, the distributorship relies on free-lancers. Roman of Centurion says free-lancers usually do up to six hours of typesetting a week. "It gives us the extra four to six hours a week for other projects," says Roman. The free-lancers also are paid less than employees.

Other tips:

• Hire interns from local colleges or high schools. Many interns will work for free or minimum wage to gain work experience. They can handle administrative tasks or miscellaneous projects that would otherwise be completed by high-paid employees.

• Put your children on the payroll. Hire children under 18 to clean, file, run errands, handle correspondence and perform other administrative tasks. Pay them a fair market wage, and keep track of the hours they worked. The tax advantages are significant. Their wages aren't subject to Social Security tax, and you can pay them nearly $4,000 before the wages are subject to federal income tax. Talk to a tax advisor for details.

• Hold contests rewarding employees for ideas. Alpha Business Forms asked its 35 employees to place money-saving ideas in a box in its lunch room. Employees whose ideas were implemented received a bonus. "It keeps everyone in the money-saving mode," says Peter Bond, vice president. "You get a lot of good ideas at a minimum expense."

• Outsource public relations, warehousing, payroll services or other functions if it is cost-effective. The Frugal Entrepreneur offers this rule of thumb: "If you can find someone to do tasks for a rate that is less than you can generate for work you do best, hire them."

• If you have tedious tasks such as stuffing envelopes for a large mailing, encourage receptionists to handle the tasks between phone calls. Customer service reps or other employees who spend a lot of time on the phone also can perform these tasks while on hold.

Telephone Service
Long-Distance Service
"Competition is the name of the game," says Robert Rosenberg, president of Insight Research Corp., a telecommunications market research firm based in Livingston, N.J. "Everyone sees the ads on television....If you want to get good service and save some money, you have to look beyond the top three providers." Rather than using AT&T, MCI or Sprint for long-distance service, Rosenberg recommends turning to smaller, reputable companies which typically charge 10 to 15 percent less than the large companies.

After you've selected a long-distance company, Rosenberg offers two tips. "Make sure they pick up all charges for switching from one carrier to another," he says. Also, negotiate short billing increments. Look for companies that bill in 6-second increments rather than those that round calling time to 10 seconds. Additional considerations include monthly fees, installation fees and volume discounts. For a list of third-party telephone resellers who may offer cheaper rates, contact the Telecommunications Resellers Association at 1155 Connecticut Ave. NW, Washington, DC 20036.

No matter which long-distance carrier you select, consider the following tips:

• Before you rack up long-distance calling charges, dial (800) 555-1212 and see if there's a toll-free number for the organization you're calling.

• If you're on the road and making several long-distance calls on your credit card, don't hang up between calls. Press the pound key after you complete your first call. When you hear the dial tone, you can place your next call. You don't have to enter your credit card account number again, so you avoid new account charges that can cost 50 cents or more per call.

• Avoid calling during prime business hours. If your office is in the West, call vendors or clients in the East before 8 a.m. Conversely, Easterners should call their West Coast peers after 5 p.m.

Local Service
It's commonplace to switch long-distance carriers, but very few people realize there are often options for local service as well. Rosenberg says Ma Bell no longer has a monopoly in most metropolitan areas. Robert Daino, a distributor in Hauppauge, N.Y., saved money when he switched providers. When Daino started Eagle Business Systems Inc. about two years ago, he naturally called Nynex, the local telephone company, to install phone, fax and modem lines. Six months ago, Daino wanted to install more lines. Nynex told the distributor it would take at least eight weeks to put another line in the office, located in a busy industrial park on Long Island. A friend suggested Daino call the local cable television company.

The cable company helped Daino almost immediately, installing a main junction box and fiber optic phone lines. It charged hook-up fees of $20 per line. Daino decided to switch his company's 10 phone, fax and modem lines to the cable company, which allowed the distributorship to maintain its existing numbers. Daino says Eagle Business Systems' monthly bills are about $200 less than when he was served by Nynex.

The Frugal Entrepreneur offers another money-saving tip, particularly for businesses operating out of a home. Consider establishing a business phone number that piggybacks on an existing wire rather than installing a separate line, which is more expensive. Local phone companies offer "distinctive ring" services, so your home and business numbers have different ringing patterns and you can discern which number the incoming caller is using. If you prefer a separate line, The Frugal Entrepreneur suggests installing an additional residential line first. A few months later, ask the phone company to change the line over to an official business line. The changeover fee is substantially less than new business line installation charges.

Car Phones
As new communication technologies arise, cellular phone service will become cheaper. "In the next 18 months or so, cellular providers are going to offer personal communication services," says Rosenberg. PCS is a cellular phone technology that incorporates digital rather than analog technology. These cell phones include a small display screen so users can receive e-mail and beeper messages as well as make and receive calls. "If you're a sales rep traveling in a metro area, but you don't move much beyond that area, you might look seriously at PCS," says Rosenberg. "Cellular providers are going to price this technology aggressively." He says Sprint Spectrum, one of the companies at the forefront of digital technology, is launching PCS in about 12 cities.

And there is good news for document management professionals who opt for traditional cellular phones. With the advent of PCS, Rosenberg says cellular providers are offering competitive prices for all their services. If your cell phone contract is about to expire, don't lock into a long-term contract for 18 or 24 months, he says. Rosenberg encourages people to sign month-by-month agreements, if possible. "There is considerable price pressure on providers," he says. "Take advantage of it."

Susan Keen is assistant managing editor of FORM Magazine.

Money-Saving Sources
The Frugal Entrepreneur by Terri Lonier is a 160-page guide to creative ways to save time, energy and money in your business. Published by Portico Press, it costs $12.95, plus $3 shipping and handling. To order, call Portico Press at (800) 222-7656. Or write Portico Press, P.O. Box 190, New Paltz, NY 12561-0190.

The Beacon Research Group publishes Business Consumer Guide reports, designed to help companies select office products and services. A one-year subscription costs $159 for 12 issues. For information, call (800) 938-0088. Write to Business Consumer Guide c/o Beacon Research Group, 125 Walnut St., Watertown, MA 02172. Buying tips also are available on the BuyersZone Web site.