Oily Rag: Thrift gear to cut business costs

Sell any business assets you are no longer using -such as unused office furniture. Photo / Thinkstock

Families are not the only ones enjoying the benefits of thrifty living. Many businesses gain lots of profit from having a frugal mindset.

A reader writes, "I have introduced an oily rag mentality throughout my business. Everyone has benefited. I share the rewards with staff so they now get paid more. The business is more profitable so their jobs are more secure and I'm doing better too. It's a win-win."

Let's not forget that cutting costs produces instant increase in profits and is a lot easier than trying to win new business.

There's an oily rag saying: "It's not over until the Big Fat Lazy Costs stop singing". BFLCs are costs that contribute nothing to the success of a business but sit around because no one has taken the time to review them. In one case, a business was able to save $3000 a year by putting its cleaning contract out to tender. That BFLC was outed and a $3000 saving went straight through to the bottom line - where it should have been!

Here are just some of many ideas to help run a business off the smell of an oily rag.

If you or your staff regularly stay in a motel, negotiate a corporate rate. One motel chain had a corporate rate of $125 compared to a list rate of $185.

Can you relocate your office into your home, or your workshop into a garage?

Or, if you have too much workspace, try renting out a room or part of your workshop.

If you need an office, what about sharing space with others and combining the secretarial services? This cluster arrangement works well for businesses operating within the same industry.

If you are being charged on a time basis (by every six minutes or part thereof by lawyers, for example) then don't waste their time and your money talking about the weather or the latest All Blacks game.

Sell any business assets you are no longer using - things like unused plant and machinery or office furniture. Assets sitting around lose value and take up space, which costs money.

Make sure air points gained on business travel are used for business travel. Crediting them for private use creates an incentive for people to travel (at your expense) when the good old telephone or email would probably do. The same applies to other reward schemes.

P.P. from Auckland: "I bought a huge number of envelopes on Trade Me for $10.50 (including postage). The normal retail was $250! That means $240 added straight onto the bottom line."

Make someone within the organisation responsible for reviewing all costs. Have them keep a record of how much they've been able to save and reward them with a bonus if they do well.

"Eliminate telephone costs by using Skype," suggests Chris.

If you have spare capacity in your business, try taking on new products to bring in new income streams without adding costs.

If you are buying thank you gifts in bulk for staff or clients, find out what the wholesale price is and negotiate with your supplier. One oily rag business purchased $20 food vouchers from a local cafe as gifts for its clients, but paid only $10 each for them in return for promoting the cafe and buying en masse.

Save on ink cartridges by adjusting your printer to a draft print setting.

Recycle rubbish so you are paying less to dispose of general waste. Where possible use it in your own business. For example, use recycled cardboard when despatching goods. One oily rag business is shredding sensitive documents and turning the paper waste into fire bricks. It's become a good little business for one of the staff's youngsters.

Running a business off the smell of an oily rag is really about asking the question: can it be done cheaper with the same or better results?

Thrifty businesses are good for everyone - you will increase profit, your staff will continue to have work and your customers will be able to buy your goods at a price cheaper than your competitors.

Thanks so much for your questions and tips - please keep them coming! You can send in your ideas and join the Oily Rag mailing list online or at Living Off the Smell of an Oily Rag, PO Box 984, Whangarei.

Frank and Muriel Newman are the authors of Living Off the Smell of an Oily Rag in NZ.
www.oilyrag.co.nz