First Friday Forum “Cost-Saving… Today ” February 6, 2009

1. First Friday Forum “Cost-Saving…Today” February 6, 2009 www.richmondscore.org 804-771-2400 x131

2. Your Speaker Michael McDermott Volunteer – Richmond SCORE Principal, Enterprise Tune-Up, LLC Expertise in profit improvement, productivity improvement, LEAN/Six Sigma for service companies. www.richmondscore.org 804-771-2400 x131

3. SCORE • Service Corps Of Retired Executives • A volunteer organization dedicated to helping emerging and existing small businesses. • The nearly 400 chapters nationwide are partially funded through a grant from the U.S. Small Business Administration. • SCORE counselors are retired or actively employed experienced business executives and technical experts, some from major Fortune 500 companies, or successful small business owners. They agree to work under high ethical principles without compensation. www.richmondscore.org 804-771-2400 x131

4. SCORE Services • Monthly “How to Start a Small Business” and periodic specialty workshops • Practical Mini-Workshops on a range of small business issues • Unlimited free one-on-one counseling • Email counseling • Veterans’ assistance • Referral to business information on the Internet and elsewhere • A valuable source for local networking contacts • Mentoring from sage professionals with decades of real- world experience. www.richmondscore.org 804-771-2400 x131

5. Cost Reduction www.richmondscore.org 804-771-2400 x131

6. How To Start with Cost Reduction Use the “80/20 Rule” (Pareto Principle). Chances are that 20% of your expenses are responsible for 80% of your cost. Make a detailed list of ALL expenses and break budget items down into specifics. For example, break “office supplies” and “transportation” and “shipping” down into their smallest components. Sort them from largest $ at the top to smallest $ on the bottom and work on reducing the top 20%. www.richmondscore.org 804-771-2400 x131

7. Cost Reduction Tips • Make sure that the owner approves ALL expenses and signs all checks. • Try to negotiate better terms with banks, vendors. Ask for longer pay terms; volume discounts. Shop around for a bank with better business rates and fees. There are reports that some credit card companies are lowering rates if you just call and ask them to. • Take advantage of interest-bearing checking accounts. • Get lines of credit at two different banks before you need the funds. Shop for rates and terms. If the bank threatens to stop your line for lack of use, draw on your line and put it into a savings account at another bank. www.richmondscore.org 804-771-2400 x131

8. Cost Reduction Tips • Try renegotiating a lease; ask for downward rental adjustments. Your landlord may be better off reducing your rent than trying to find another tenant. It can’t hurt to ask; owners are MUCH more flexible now. • Sublease unused office or other space. • Accept credit card payments from customers. There is a fee from the credit card company (typically 2%-5%) but, on the plus side, your cash flow improves and it may result in the addition of customers who didn’t use you before. More people use credit cards in a recession. • Consider borrowing against the cash-surrender values of life insurance policies. Check with your insurance broker. • Interest rates are WAY DOWN. Refinance outstanding loans or consolidate loans to obtain a lower interest rate. www.richmondscore.org 804-771-2400 x131

9. Cost Reduction Tips (con’t) • Join a barter network. There is a fee to join and research them before joining. (Some have been investigated for fraud.) You must report bartered goods as income. The good news: your tax liability—particularly if you do a lot of bartering—is lower since the fair market value of bartered goods is usually less. You may get some inventory turnover or use some of your available services time. There are two in Richmond: • BancMarc: www.bancmarc.com • James River Trade Exchange: www.jamesrivertrade.com www.richmondscore.org 804-771-2400 x131

10. Cost Reduction Tips (con’t) • Sell idle assets, inventory, machinery, displays, etc. using craigslist.com, auctions.yahoo.com and ebay.com and to buy inexpensively. Get over it: the value of anything is what someone will pay for it TODAY; not how much you paid for it six months ago or how much you sold it for two weeks ago. Remember that you’re paying interest every month on the money you borrowed to buy the materials and keep it in inventory. • Printer ink and copier toner cartridges. Save 50% to 75% off the price of brand new cartridges by using re-filled ink cartridges available online and a local company will pick-up & deliver refilled: doug.hendrickson@rapidrefillink.net • Consider converting from a weekly payroll schedule to semi-monthly or every two weeks. Give employees PLENTY of notice. www.richmondscore.org 804-771-2400 x131

11. Cost Reduction Tips (con’t) • Save on postage and delivery by using email. For large email files as attachments, check out services such as yousendit.com, mailbigfile.com, dropbox.com. Digital and emailed contracts are generally binding as long as the recipient provides some sort of electronic signature (which can be as informal as simply typing their name). • Earn points from loyalty programs. Credit card companies (whether issuer or merchant accounts) commonly offer discounts and bonuses based on customer loyalty. This may include frequent flyer miles, discounts on hotels and rent-a-cars, and program points redeemable for office supplies or other merchandise. www.richmondscore.org 804-771-2400 x131

12. Cost Reduction Tips (con’t) • Shipping: the U.S. Postal Service offers flat-rate shipping to everywhere in the domestic U.S. if you use their flat-rate envelopes or flat-rate boxes. As long as your items fit inside, you pay one price for shipping whether it's going across the state or across the country--plus you get the boxes and envelopes free. This can be especially valuable for shipping small but heavy items. • Check your postal scale: 9 pennies should show one ounce. • Join your trade and industry associations; they offer many cost-saving deals from rental cars to office supplies to insurance. In addition these organizations may provide you with information regarding inventory and profit ratios within your industry—an important way to track your success. Retail Merchants Association! www.richmondscore.org 804-771-2400 x131

13. Cost Reduction Tips (con’t) • Watch employee theft. Lock up supplies if necessary, develop a sign-out system. Establish an anonymous feedback system to allow honest employees to alert you to dishonest employees. “Shrinkage” is one of the top reasons for profit slippage in retail operations. • Cut your long distance and telephone charges. Look into Internet telephone services such as Skype or Vonage that allow you to communicate nationally and internationally at a fraction of normal telephone rates by calling over the Internet. Double check that you are getting the best value on your phone service with a FREE, no-strings-attached, telecommunications evaluation from Telepath: 804-339-3532, jspacek63@gmail.com, www.telepathinc.com • Call suppliers or customers on their 800 numbers. www.richmondscore.org 804-771-2400 x131

14. Cost Reduction Tips (con’t) • Consider adjusting business hours to meet customer demand (open Sunday Noon- 4pm?) • Start an incentive program or paid Suggestion Program for ideas on how to save money/time, increase productivity, increase customer satisfaction. • Lease rather than purchase vehicles and real estate. For vehicles, consider a Terminal Rental Adjustment Clause (TRAC) lease that guarantees your business a certain residual price for the vehicle when the lease expires. This is the most common type of lease for business owners who want the option of buying the vehicle for a pre-determined price at the end of the lease.ALWAYS read the contract fine print! • Cancel insurance on vehicles and equipment not in use www.richmondscore.org 804-771-2400 x131

15. SCORE Counseling Cost-savings ALONE may give you a 20% improvement, at best. If you are smart enough to attend this forum, then you could benefit from a complete review of your business tactics and strategy. You can request FREE one-to-one business counseling sessions at: www.richmondscore.org which can be held at: • The SCORE office in downtown Richmond • Another location more convenient to you and your counselor such as libraries, Hispanic C of C, Goochland C of C, Barnes & Noble and other bookstores, Starbucks, Panera Bread, etc • Online www.richmondscore.org 804-771-2400 x131

16. Chapter 12 – Richmond,VA 2004 National Chapter of the Year Federal Building ▪ 400 North 8th Street ▪ Suite 1150 P.O. Box 10126 ▪ Richmond, Virginia ▪ 23240-0126 Website: www.richmondscore.org E-mail: info@richmondscore.org Tel: 804-771-2400, ext 131 www.richmondscore.org 804-771-2400 x131