Firm up your firm

Written by Allan Britnell

When a consultant from the cost-reduction firm ERA Canada examined the books at Mulligan Marketing Group Inc., owner Terry Mulligan didn’t expect much. But even though his trade association had assured him that his Mississauga, Ont.-based promotional products firm was getting the best shipping rates possible, he agreed to let ERA shop around for a better deal. After just a few hours in the office to gather the relevant shipping details, the ERA rep approached four shipping companies and asked them to submit bids based on MMG’s volume.

“They came back with a 29% savings,” says Mulligan of the low bid from the company MMG was already using and happy to stay with. It worked out to about $13,000 a year in reduced costs.

No matter how lean and mean you think your company is, you have flab somewhere. That doesn’t necessarily mean that you’re overstaffed. In fact, if you trim the fat in other areas, you may never have to trim the payroll.

As MMG discovered, freight charges are one expense category where you’ll likely find significant cost savings for a fairly modest investment in time and energy. Here are six others:

Jet lagAccounting and business management surveys rank business travel as one of the largest controllable expenses — making it an early stop on any CEO’s cost-cutting tour. Even small workforces can reduce costs in this area with an organized plan. Danielle Waters, senior vice-president, sales and marketing, at BTI Canada Inc., a Toronto-based provider of travel management services, suggests creating a standardized booking procedure and designating a staff member to co-ordinate all your company’s travel arrangements. “Otherwise, you get a hodgepodge of travel booking that is very difficult to control,” she says. “By designating a travel co-ordinator and establishing policies, you will uncover opportunities for very specific negotiations.”

For example, if the bulk of your company’s travel is to one city, you can negotiate a volume discount with hotels or car rental agencies there. And the volume doesn’t have to be huge: Waters says that many hotels are willing to negotiate 10% to 20% discounts on as few as 20 to 50 room nights per year.

High-tech hijinksYour office may be cluttered with high-end gadgets that you don’t completely understand how to use, or that you may not even need. “The greater the potential for confusion, the greater the probability the company is paying too much,” says Ross Pinkerton, president of Toronto-based ERA Canada. “The copier people always try to upsell. You end up with a copier that will sort, collate, copy and make an ice cream for you at the end of the day.”

Do you really need all that? Although your staff might not have the time nor expertise to analyze all your systems, consultants such as ERA or KPMG LLP employ diverse stables of experts who can. Niche firms also exist, such as BTI Canada, that focus on specific expenditure streams. They may charge a per-use fee or take a percentage of the savings. ERA charges its clients 50% of the found savings for a two-year period. After that, the ongoing savings are all yours. And if it can’t find any areas in which to cut costs, you don’t pay a cent.

Small-ticket itemsYou can often find significant savings in the smallest budget items, such as office supplies or uniform rentals. “You’re not actually paying a lot per item,” says Pinkerton, “but there are lots of transactions.”

Brendan Cunneen, Toronto-based vice-president of consulting services for the Business Development Bank of Canada, tells the story of one client that ran out of printer paper. A new staffer, not realizing that the company had a paper-supply contract, picked some up on sale at Office Depot. “It turned out that it was a 40% saving on their supposedly great contract with their paper supplier,” says Cunneen.

A couple of bucks per pack of paper may not seem like much until you add up how many reams you churn through in a year. “[The owner] said to me, ‘What else do I need to question?'” says Cunneen. “Question everything.”

Bank on itYou need to negotiate with your banker. “Despite popular belief, bankers have discretion to negotiate on their rates, transaction-processing fees — just about all their services,” says Pinkerton. In the banking industry, “the guy who’s been a client for 20 years is probably paying considerably more than the client the bank acquired last week.”

Rent controlWhile you can’t stop paying the rent, you might be able to negotiate a better deal when the lease is up. But you need to plan ahead. Francesca Groves, president of Toronto-based Corporate Facilities Canada, which locates, designs and customizes office space, suggests you start looking at your options a year before your lease expires. “You do this search whether you’re planning to move or not,” says Groves. “The only way to leverage the landlord in your current space is to be prepared to move. We make the current landlord compete for your tenancy.”

Even if you’re midway through a lease, savings can be found. Groves’ clients have often uncovered inappropriate charges buried in the operating costs. In some cases, she even suggests hiring a forensic auditor to scrutinize the expenses added to the operating-cost portion of the lease. Her auditors have found errors ranging from basic miscalculations to a $40,000 tax rebate a landlord “forgot” to pass on to a tenant. She has even heard of landlords adding sports tickets and car leases to the bill.

Tighten your utility beltEllis Packaging Ltd., a Pickering, Ont.-based carton manufacturer, is another firm that had ERA look at its operations. Ellis saved on its electrical and heating bills through a combination of renegotiated rates and improved efficiency in operations. “They’re like a buying group,” says John Dickson, Ellis’s operations manager, of ERA’s ability to negotiate with big utilities.

Like MMG, Ellis found the process fairly unintrusive. And, given that the only remuneration charged came out of the found savings, it was a no-lose situation. “It was painless,” says Dickson. “And we keep the benefit going after their portion of the fee is paid.”

Utility savings can also be found by taking steps similar to those you may already be taking around your home: using energy-efficient lighting, programmable thermostats to lower the heat overnight and even by reducing the temperature in the hot water tank.

Telecom is another utility you are probably overpaying for. As with travel, many firms have a haphazard pattern of employees on individual cellphone plans with a variety of providers. As a result, they fail to capitalize on group rates and have no efficient way to track costs.

And don’t forget your old-fashioned land lines, which probably cost you at least $40 each per month. “We’ve come across many, many clients that have twice the number of lines they need for their activity,” says Pinkerton. “But the telephone company’s not going to tell them that.”

© 2005 Allan Britnell

Originally appeared on PROFITguide.com