A plan for small business
NEW YORK (AP) - February 6, 2008 The Russo Group brought in a CFO who created a strict policy on
expenses - anything over $100 had to be preapproved - and enforced
it. Jaci Russo, senior partner in the Lafayette, La.-based
marketing agency, remembered the CFO, who was her subordinate,
confiscating her credit card because she spent $350 without getting
prior approval.
The result: "Looking at expenses from year one to year two, I
would say we saw about an 18 percent reduction in expenses. For a
small business, that's huge - the difference between being
profitable and not."
Russo described life without a financial executive as chaotic.
"We spent money on things and later couldn't figure out why," she
said.
The Russo Group is seeing some impact on its business from the
slowing economy, so the company is paring its expenses further. For
example, it recently ordered 12 months' worth of marketing
materials, instead of the usual 36. That kind of cost cutting will
prevent the firm's cash reserves from being depleted.
Buying less and buying cheaper is of course a crucial strategy
in cutting costs. That can call for a company to become creative
about where it buys supplies and materials, and it forces many
companies - particularly manufacturers - to make fundamental
changes in their operations.
By switching to recycled aluminum from pure aluminum ingots,
Saunders Manufacturing has been able to slash the cost of making
products including clipboards and portable desktops. CEO John
Rosmarin said of his Readfield, Maine-based company, "our issues
are probably less to do with the economy than the ongoing situation
with competition from China."
Saunders also has stopped anodizing aluminum, a process that
uses electricity to put a protective layer on the metal. Instead,
his products are painted, saving him a lot of money on electricity.
Rosmarin's customers, which include big office supply chains
like Staples and Office Depot, demand the lowest possible price.
So, he said, "we made a conscious decision years ago to protect
market share, and to do that by reducing product costs."
Outsourcing of payroll, human resources administration and other
tasks can also help a small company lower expenses.
Antarra Communications, a public relations firm based in Garden
Grove, Calif., has contracted with a professional employer
organization, or PEO, not only to handle payroll and HR chores, but
to also obtain health insurance and create a 401(k) plan for
employees at a great savings.
"We can offer really good health insurance and a 401(k) - what
it would cost us to do that on our own in a year would just be
ridiculous," said Susan van Barneveld, the company's co-founder.
Outsourcing those parts of the operation also allows van
Barneveld and other top executives to focus on the PR business.
She said Antarra also uses technology outsourcing to get work
done more efficiently and cheaply. Public relations firms need to
keep track of media stories about their clients, something that van
Barneveld said would cost her company well into the thousands of
dollars every year if it were done in-house. The company subscribes
to services that track stories, maintain client lists and do
similar tasks.
Van Barneveld estimated that Antarra's use of outsourcing and
technology is saving the firm 25 percent to 30 percent annually.
Technology has been a boon to small companies in many ways.
Software applications and Web-based programs of all sorts can get
work done faster and with fewer mistakes, and there is plenty of
high-tech help designed for companies in specific industries.
Companies looking for help in cutting costs or in finding the
right technology can seek guidance from SCORE, the organization of
retired business people who advise small business owners. Contact
SCORE at www.score.org or by calling 1 800 634-0245. They can also
contact the Small Business Administration's Small Business
Development Centers, which also offer assistance. They can be
located online at
http://www.sba.gov/aboutsba/sbaprograms/sbdc/sbdclocator/SBDC(unders
core)LOCATOR.html.