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Oscar Dominguez: Cut expenses to build profit

Union Bank

Posted: April 24, 2009 4:23 p.m.
Updated: April 25, 2009 4:55 a.m.
 
As a small-business owner in the Santa Clarita Valley, a tougher economy may provide an opportunity for you to increase your bottom line by carefully examining each expense and cutting out the extras.

By reconsidering each expense and making the distinction between wants and needs, you will also create a good habit that will serve you well during better times.

Start by reviewing every expense, from the smallest to the largest. Don’t leave any expense out, as each penny saved can help your bottom line.

Review items such as office supplies and determine what can be used more sparingly and what your business can simply do without.

Discontinue unnecessary subscriptions or services that were nice perks during better times and reconsider upgrading software and technology unless it truly is an integral part of your business.

It may also be a good idea to gather your employees for a meeting to brainstorm money-saving ideas that you may not have considered.

Your valued employees represent your business’s  frontline. They handle your products or services on a hands-on level every day and may have some great ideas to contribute.

They may also appreciate the opportunity to help your business thrive. In fact, some companies offer cash incentives, a percentage of the total savings, to help inspire creative thinking.  

Keep in mind that there are certain areas of your business where trimming should be a last resort.

These include areas directly related to revenue generation, such as production-related expenses, marketing and customer service.

Other steps you can take to cut the extras include:

n Inspect inventory levels. Evaluate your inventory turnover ratios by product line and consider offering deep discounts for products that are not moving as rapidly as others. Be cautious when budgets are tight and reorder for committed orders only.

n Consolidate space. Consider consolidating operations into one building and sublease unused space. Renegotiate lease terms, especially with landlords facing high vacancy rates.

n Share expenses. Consider partnering with other small business owners to share expenses and perhaps obtain a discounted rate for large-volume purchases. Pooling resources is a savvy way to save money and improve cash flow.  

n Spend wisely. Only spend on what you really need to build revenue. Consider forgoing expenditures for equipment and other extras that may amount to wants rather than needs.

By going back to the basics, small-business owners can develop a keen eye for the key ingredients needed to run a successful business.

When better times are here again, this exercise in restraint and thrift will become a routine you can continually count on to help your bottom line.

Oscar Dominguez is vice president and branch manager of the Stevenson Ranch branch of Union Bank, located at 25954 The Old Road and the Valencia Bank & Trust branch, located at 23620 Lyons Avenue.  Visit www.unionbank.com for more information.

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