Posted by Stephanie Valentine on Jun 30, 2009 in
Small Business Cash Flow 
What’s overhead? Not just the roof. For a small business overhead is usually the debt hanging over the small business owner’s head. Actually, overhead is the ongoing general cost of running your small business, and can include items like the cost of carrying inventory, office supplies, payments on equipment, and the cost of service providers like accountants and lawyers.
In the last few articles I’ve discussed ways small business owners can increase their cash flow into the business, by converting accounts receivables into cash. In this article, I outline four ways to decrease your company’s overhead. These simple solutions can help your business preserve cash, and stay solvent.
Decreasing Small Business Overhead
1. Barter with Others
Trading products or services with other businesses is one way to reduce your overhead. I often use this approach in with my small businesses. I may trade my writing services or web-design work for graphic design services or legal advice from another company. Bartering works well so long as both parties have goods or services of equal value to trade. If you’re not sure how to go about bartering, check in with your local Chamber of Commerce, which may already have a barter network in place.
2. Reduce Inventory
The cost of carrying inventory makes up a large percentage of the overhead for many small businesses. While it’s essential to provide your clients with what they want, there are ways to do that while trimming your inventory. First, review your inventory to identify which items are hot-sellers and which have been sitting on the shelf gathering dust. Next, locate the items that generate the best profit for your business. Finally, trim the low-profit and slow-selling items from your inventory. You can even turn this action into a benefit that can be conveyed to your customers. Turn an inventory reduction into a “specialization.” For instance, one gift store business reduced inventory by carrying only products made by indigenous people around the world. The resulting reduction in overhead has allowed the business to expand their marketing efforts, and the increase in cash flow is the overall result.
3. Renegotiate the Cost of Regular Business Services
Most small business owners are too busy to price-shop, but you’ll find that you can negotiate lower costs for regular services your business buys by doing just a little price shopping. Call around and get three to for quotes for regular business services, including insurance, long distance phone service, equipment maintenance, and delivery services. Once you find the best rate, go back to your current supplier and suggest they meet the price. If they refuse to do so, consider setting up an account with another, less expensive service.
4. Join a Buying Co-op
Buying in bulk is always less expensive. Many small business owners are now forming buying co-ops to purchase office supplies and equipment in bulk. For instance, many office supply stores offer discounts for buying paper, ink, or toner in bulk. If you don’t already have a buying co-op in your area, call up a few of your fellow small business owners and create one from scratch. You can also call your local Chamber of Commerce to see if a buying co-op exists in your area.
Reducing small business overhead is really a matter of paying attention to the details. Often, the savings you get from renegotiating your insurance policy or buying in bulk may not seem like much, but if you add up all the small savings you’ll find that your average annual savings can be significant. These days, when cash is vital to business survival, pinching pennies where you can is often the difference between a thriving enterprise and a bankrupt business.
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Photo credit: Office Supply Construction
Tags: barter, cash flow, inventory, small business overhead
Small Business Owners: Who Do You Know?
Some days I sit staring at a blank computer screen and wonder, “What do I know?” What expertise do I have that I can share with small business owners? What would actually help?
Some days this question just stumps me because some days my brain is filled with nothing more than the equivalent of a fart (hence, the brain farts). That’s it, nothing more, just hot stinky air. Then it occurs to me that I’m asking the wrong question. I should be asking,
“Who do I know?”
That’s a good question for any small business owner on any given day. Who do you know?
On days when business sucks, your brain is stuck in park, or you otherwise have no other good ideas, ask yourself this questions and let it rattle around in your brain for a while, like a big shiny marble.
5 Ways to Partner with People You Know in Small Business
Who do you know who can help your small business? You know lots of people, you just don’t remember who they are. Or you’re not thinking about them in the right context. Here are five examples of how small business owners have called on me in the last week to network, barter, share, exchange, joint venture, or buy. Who do you know who you could call on for these things?
1. Go Ahead, Ask Me!
I know this one is obvious, but it remains one of the most effective ways to get business. I was chatting on the phone recently with Rick at the local smoke shop. At the end of our conversation, he said to me, “We just got some new cigars in. Stop by let’s take a look at them.” Guess what? It’s on my list. I like the guy, I like the occasional cigar, and I trust him. He asks, I go.
2. Trade Tiddlywinks
On one of my business networking sites, an enterprising entrepreneur advertised a very specific offer. He offered to promote a one-sheet about your business at an upcoming fair in giveaway bags if small business owners in his network signed up for his upcoming event. The barter offer was very clear with no hidden agendas. A lot of people took him up on his offer.
3. What’s Up, Doc?
If your brain isn’t working, maybe someone else’s is. A business buddy of mine recently called up and said, “I need 30 minutes. I’ll give it back to you when you need it.” He needed some new marketing ideas to jump start his small business. He wondered if I had heard or read anything nifty lately. His offer? If he could pick my brain for 30 minutes now, he would act as a sounding board for me later. This only works, of course, if you like the other person’s brain, but sometimes beggars can’t be choosers.
4. The Medusa Approach to Business Development
A few years ago, a business gal pal of mine called me up. She proposed that we form a little local business gal pal network to brainstorm business development. Once a year, we four gals get together and brainstorm about business development. We each come prepared with the business plans for our small businesses, as well as the biggest challenges and questions we face. We spend four hours focusing on each person’s small business. We offer solutions, tips, resources, support, and a lot of laughter. We come away ideas, inspiration, hope, and creativity for our small businesses. Can you think of a few business pals you could grab to form this kind of mastermind group?
5. Friend of a Friend
There’s only six degrees of separation between you and anyone you want to meet. Really. Studies have been done (”Six Degrees: The Science of a Connected Age” by Duncan Watts is a fascinating read on this). So if there’s someone you really want to meet, who could really help your small business, find out if that person is a friend of a friend. Or a friend of a friend of a friend of a friend. It’s all good. Just keep goin’ down the line until you hit that sixth degree. You’ll meet that person, even if it is Clint Eastwood or Barack Obama.
Bonus Round: Karma Points
As always, for those who love extra credit, there is a bonus round. If you’re really, really bored, you could always build up Karma Points. Yup, you could do a good deed for a business pal just because you have a heart the size of Chicago. Will you get paid back this lifetime? Maybe, maybe not. But all good karma comes around. Who knows, maybe in your next lifetime you’ll be Bill Gates. You never know!
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Photo credit: 3-legged race
Tags: barter, share, small business owners, small business partners
