"Five Ways Small Companies Can Reduce Costs"
Talking Points Five Ways Small Companies Can Reduce Costs For most companies, 2. Hire expertise unloaded at the airport by 6 pm; overhead expenses amount Having an expert review your in order to accommodate the to 15% of revenue. expenditures will save you money. client, the supplier tacked on a A company that spends, say, substantial “late pick-up” fee. By $100,000 on telecommunications moving the pick-up time just 15 A $30 million company each can’t usually afford to employ a minutes earlier, the customer year spends $4.5 million on saved $261,000 annually. $250,000-a-year telecom expert. overhead. However, if that company uses an outside telecom expert to review 4. Put yourself in the supplier’s By helping this company the category, a savings of $40,000 shoes reduce overhead expenses to $50,000 a year is realistic. When developing a Request for by its average of 20%, Proposals, think about your ERA saves them $900,000 3. Be a better customer request from the supplier’s annually. In order for your suppliers to perspective. What level of dramatically reduce costs to you, specificity and thoroughness could they have to be able to operate you provide that would result in a 1. Get better data their own businesses more great quote? Most companies fail A professional service firm that efficiently. Ask an expert to look to get competitive pricing because specializes in the strategic at the way you work with your they fail to provide all the management of overhead costs suppliers and explore what information their suppliers need to has a huge advantage when it efficiencies you can come up with have in order to minimize risk. comes to knowing what the to cut your supplier’s cost. Think about the RFPs your own marketplace pays for goods and Perhaps you can order less company responds to most services. Corporate CFOs do not frequently. Perhaps overnight aggressively. Aren’t they the ones have access to the volume and delivery can be comfortably that provide detailed, complete quality of data available to a firm replaced by two-day delivery. and accurate specifications? that specializes in, and focuses A professional can help you think Customers who inspire confidence exclusively on, specific expense about the benefits you might be and minimize the supplier’s risk categories. paying for that are not essential to are rewarded with the most your business and that you might aggressive pricing. For example: When you put office supplies out to bid once a year, be willing to forgo in exchange for you end up with three to five a better price. A professional 5. Level the playing field works with suppliers who are Your suppliers have an advantage pieces of information about the happy to help you be a better over you. Day in and day out, office supplies marketplace. We do customer. suppliers actively look for ways to 50 of those projects a month so, improve their margins. But how in the same timeframe, we For example: The receptionist at a often does your company accumulate 3,000 pieces of company with a $1 million annual negotiate a discount on, say, information. Who is likely to be spend on overnight delivery had office supplies? Maybe once every able to negotiate the best value? scheduled final pick-up for the couple of years? company for 5:15 pm. The supplier had to have its truck V2 10/20/08 Furthermore, every industry has its own, highly sophisticated and unique pricing model that only the people with expertise in that particular industry fully understand. Here are pricing approaches the average person doesn’t know about: • Credit card processing fees – Many companies successfully negotiate the best rate, but few actually transact in the way they are required to for that rate to apply. • Transportation – Transportation firms negotiate off tariffs. These tariffs are very high, which allow suppliers to quote high, seemingly extraordinary discounts. A high discount number makes the customer feel like he’s negotiated a very good deal. Our transportation experts know the ins and outs of the tariff system. They know they can A cost-reduction specialist, push for even higher discounts, and just how high they can push. with an in-depth insider’s • Office Supplies – The office supply understanding of an industry’s industry uses a multi-tiered discount approach. Customers are typically pricing strategies, puts you on able to negotiate a substantial discount on “market basket” items, equal footing and in a position only to discover that suppliers do whatever they can to direct them to negotiate the REAL best toward items that are not in their deal. That’s what ERA does market basket – and therefore don’t qualify for the discount. best.