Smart business owners are always seeking ways to cut costs. It’s a way to capture “found money” and improve profitability, even in markets where price points are low. While many cut hours to save on labor dollars, there are other ways to find cost-saving opportunities. (Labor cuts can deteriorate your quality of service.) The key is to take a holistic look at your organization: Look everywhere to find situations where you could trim expenses. Here are 5 ideas.
Cost-Saving Opportunities #1: Evaluate Wages
Today’s labor market is pressuring most owners of service businesses to pay more for general labor than they did even two years ago. Finding good people isn’t easy when the unemployment rate is at record lows. So, naturally, capturing talent will require offering competitive (higher) wages. But be sure you’re not tipping the scale with wages and paying more than you can afford. Remember, if you hire field labor at a higher wage, everyone else in higher positions will expect a similar adjustment.
Cost-Saving Opportunities #2: Reconsider the Sacred Cows
We’re talking about people who have been in your organization for years, but maybe haven’t grown with the business. They’re probably long-term employees that are overpaid but underperform. They can chip away at the morale of hard-working employees. (Who wants to find out a crewmember who doesn’t do his fair share is getting paid more?) Why are you holding on to these sacred cows? How would your business be different without them?
Cost-Saving Opportunities #3: Cut Back on Company Vehicles
Getting a company truck is a perk, but it shouldn’t be a given. There are liabilities associated with giving employees vehicles to take home. Not to mention, the mileage can add up. And how well are you tracking company time vs. personal time? Maybe it’s time to cut back. Or, you can only allow employees who are on call to take home company vehicles. You can put procedures in place: Set a fixed number of commute miles and collect pay for excess miles driven. But, employees live different distances away from the office, so is it fair to pay for one worker who commutes 50 miles and another who drives 10 miles to work? Not really. You don’t have to remove this benefit, but place limits on mileage.
Cost-Saving Opportunities #4: Review Admin Processes
We’ve addressed a number of business processes in this guide that will help you maintain a healthy financial picture. Dig into your invoicing, receivables and payables processes. Are there redundancies? Are there processes that could be more efficient? Could you streamline who handles these tasks and how they do it? Is there time wasted on tracking down paperwork from employees? Do you need a system to improve timely, accurate paperwork filing from workers?
Cost-Saving Opportunities #5: Stay On It
Finding cost-saving opportunities takes diligence—and persistence. You’ll constantly be evaluating your processes to find ways to improve efficiency, remove redundancies and leverage technology that can save time, money and resources. Tightening up will make your business sharp and sustainable in good and bad economic times.
EDITOR’S NOTE: This story was an excerpt from one of NALP’s member resources, providing by well-known industry consultant Bruce Wilson. Want to learn more about bettering your business? Become a member to enjoy these resources and more.
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