Ten ways to cut your business costs
Thursday, May 10, 2012
Print firms are no strangers to the discipline of cost reduction. For years, the industry has been caught between the internet, print management firms and increasingly severe recessions. Budgets have fallen, company sales have been hit and, for many print firms, the only way to stay in business has been to cut costs.
On the downside, this has often involved some tough decisions, with long-serving colleagues being made redundant. But, on the upside, it has also seen the industry innovate like never before to make print production more efficient. Yet, even those firms that have done the most impressive work in cutting costs out of their manufacturing processes have sometimes found that it is not enough.
There are other options. Print firms need to turn their attention to their non-print operations, and apply the same rigour and ingenuity in cutting costs there. Here are 10 ways to get you started.
1) Cut your insurance cover
If you have too little cover and the worst happens, you can find yourself in deep financial trouble, so you should always make sure you have enough insurance. But you should make sure you are not paying for cover you no longer need. Review all your policies once a year and ensure they are giving you exactly what you need. Even a 5% saving can be significant when made across all the policies you have, from public liability through to vehicle, travel, buildings, contents, equipment, key person, legal and business continuity.
2) Reduce your landfill
DS Smith Recycling is the UK’s largest paper and packaging recycler in the UK, and it provides recycling consultancy and services to print firms including CPI Group, Adare, Pindar, MMP and TJ International. Jade Burke, marketing manager, believes that most print firms can save significant sums by reducing the amount they send to landfill.
"Most send 5–8% of their total waste to landfill," she explains. "We get them down to 1–2% simply by helping them put their waste in the right bins. When you consider that you are paying around £100 per tonne to put it in landfill and that you can make £10–200 per tonne by selling your product for recycling, you begin to realise just how sizeable this double benefit can be."
3) Get best value for your recycling
Her colleague, Liz Mallard, a print specialist, points out that print firms can make even greater savings by getting the best value for their recyclable material. She says: "To give just one example, the price of paper varies hugely, so if you were able to segregate your paper into all 300 grades, you would greatly improve the price you receive."
She adds: "That is rarely possible and you need to strike a balance between the time it takes to separate materials and the final price you achieve, but most print firms could do more in this area. Very often it’s simply a case of making staff aware of the implications of correct separation, and then putting the right bins in place."
4) Use online networks to recruit
Recruitment is expensive. Advertising costs a lot and it often ends up with someone spending hours ploughing through unsuitable CVs. Recruitment consultants are less time-consuming but frequently they want 25% of the first year’s salary. A growing number of businesses are turning instead to social media sites such as LinkedIn. Its Talent Basic package costs £360 a year and will enable you to search directly for your next hire and to contact them directly.
5) Cut the cost of premises
Greg Palfrey, head of restructuring and recovery services at business advisory firm Smith & Williamson, advises print firms such as SV II Digital, Whitehorse Press, Century Litho and Century Web. He believes that many print firms can save money by reducing the size of the premises they use or upsizing more intelligently.
He explains: "I recently worked with a print firm that was expanding and was about to spend £100,000 on the building next door. I suggested they put in a mezzanine floor instead. This cost just £40,000 and was actually a better solution all round."
6) Take a pay cut
Palfrey also believes that many company directors could benefit in the long-term from making tough decisions on their own short-term pay. He says: "Another firm I worked with was struggling so I suggested the directors take a pay cut. Initially they were not at all enthusiastic but, after a while, I managed to persuade them that it was really the only viable option."
He continues: "They all took a 50% pay cut. Soon afterwards they were surprised when their staff volunteered to take pay cuts of 5–7%. This so galvanised the business that within two years the firm was able to buy a competitor, and just one year after that the directors paid themselves the largest dividend in the history of the company."
7) Stop looking for new business
New business is expensive. You have to pay for marketing materials and salespeople, and then when you win the business you incur the inevitable start-up costs associated with any new client. You would be far better off looking at ways of increasing sales to existing clients.
Do they know about all of your services, or is there something they would buy from you if only they knew about it? Is there another part of their business you could work for? Could you persuade them to increase their existing orders with you, perhaps offering a better unit price?
Do enough of that and before long you might find you can stop spending money on new business seeking altogether.
8) Stop offering your clients free credit
Credit control is another area where many print firms can make savings. In an industry where clients seem to hold all the power, it can be difficult to chase for payment. All too often print firm bosses fear they will jeopardise the relationship, and so payment terms of 90 days are now not uncommon. However, by ending this form of free credit print firms can transform their finances.
Nick Green, executive director at Tangent Communications, has also worked to better manage debt. "One way we have been able to keep costs down is by outsourcing debt collection," he says. "We now use an external debt collecting company to support our internal team to ensure that outstanding debts are successfully managed. That is obviously essential in maintaining stable cash flow for any business."
9) Look at your energy usage
Energy prices are now higher than ever and being in a high-energy-usage industry, printers are being hit more than most. There are simple things that can be done to reduce that energy usage, however, that can be converted into very significant savings on bills.
Education is one of the most important aspects. Getting staff to turn off lights in unused rooms, to shut down computers that are not in use, to ensure that, in winter, heat is not escaping out of open doors and windows and that, in summer, those windows and doors are closed to reduce consumption of air conditioning. These are all important and highly effective policies that can be turned into real cash savings.
Small outlays on technology can also help – with light sensors, heat exchange and self-close doors all offering quick ROI and long-term savings.
10) Appoint a cost savings champion
Finally, you should consider appointing a cost savings champion. He or she can come from any department, and often less senior people are the most successful cost savings champions, since they are closer to where the savings can be made. By offering them a percentage of any savings made you can ensure that the champion approaches the role with enthusiasm.
They can act as a focus for ideas on cost reductions, gathering ideas from around the business, filtering them, and then putting the best ones into action. Many firms give them time to speak at company meetings. Simply having someone who is not the managing director stressing the importance of saving money can do much to focus minds on the issue.
Green at Tangent has also deployed this technique to good effect. He says: "We recently extended the responsibilities of one of our team members to manage the company’s internal costs. This has been hugely successful and we have seen terrific results. We’ve cut costs in a number of areas including utility bills, mobile phone contracts and travel. We ensure that an internal costs report is carried out quarterly and last year it revealed that, since doing this, the group had saved more than £100,000."
If you have found other ways of cutting costs from your business, please add your tips to the comments section below