There are dollars and quarters laying all over your shop floor and the office. You just aren’t seeing them. Every business I’ve ever seen has had significant potential cost reductions staring them right in the face; sometimes it’s just hard to see them.
You can be as anal about cost reductions as you want. It is possible to re-roll your adding machine tape onto a spare spindle, and then use the blank side. You can dry out those paper towels you use in the studio, and reuse them. If you already do this, then stop reading this section right now. You’ve already given new meaning to the phrase “cost reduction” and there is nothing new for you here.
Reducing your costs should be the goal of every entrepreneur. After all, “A penny saved is a penny earned.” Some examples are no-brainers, such as deciding to fly coach instead of first class, using Bic stick pens instead of Cross pens. Actions such as these are merely common sense approaches to improving your bottom line.
Subtler are the substantive changes in practices or procedures or the way you operate that afford you significant reductions in the costs of doing business. These can be the hardest ones to find, because they tend to be wound into the very way you do business — and probably have been since the beginning.
Let’s take a simplistic example. Say you have an office person. She (sorry, ladies!) spends a lot of time on the phone, occasionally files something besides her nails when really bored, and acts as the receptionist when a customer or vendor wanders into the place. This person generally acts busy, and if you ask her she’ll probably tell you that she’s overworked and needs (a) a raise, (b) more time off, (c) a better benefits package or (d) all of the above. While all of this is going on you are taking personal phone messages for her (she’s in the ladies room using the toilet paper you bought!), you are rummaging around your filing cabinet looking for that mis-filed order from your largest catalog house, and it seems that she is forever asking you a barrage of questions about how to do her job (probably the same questions over and over again). Does this sound familiar? She’s a cost reduction waiting to happen, is what she is.
I did just that one time. Started licking the stamps and answering the phone myself. Guess what? Phone calls in general dropped by half, with the added benefit that they really were business calls, and were for me anyway. Mis-files were eliminated. And I discovered that it took no longer to actually do the job myself than it had been taking to explain to another how to do it. Of course this won’t work in every instance, and there will always be people who are nearly indispensable to the smooth running of your office. I only use this example to point out that office staff is overhead; it does not generate revenue. If you can do it yourself, the salary, the payroll taxes, employee benefit costs and other expenses attaching to having employees (remember that toilet paper!) all fall to the bottom line as increased profits.
I don’t want to just pick on office staff, either. But I do want to make the connection between essential personnel, and those you can get along without.
With fourteen production employees I got rid of the studio manager/foreman. Why? He certainly knew his job, and was good at it. I started with the premise that I had a good work force. These people were highly skilled, they made a decent wage with an excellent benefit package, and their average tenure with the business was around ten years. I treated them like the family of craftspeople they truly were, and I didn’t have any labor problems. So what did I need a buffer between them and myself for? They had the initiative and the knowledge to do their jobs anyway. All they really needed was someone to order supplies and materials for them, and then tell them what to produce in what order. Adios, Mr. Shop Manager. Guess what? Productivity actually picked up. I ended up getting more product out of the same people, and saving all those employee-related expenses for a very expensive employee.
The lesson here is that people costs are the best candidates for significant cost reductions. They are also the hardest to implement. I’m the boss, and it’s downright undignified to be seen licking stamps or answering your own phone; besides, those two were my friends. But if you can get over your reticence, there’s a lot of money to be saved by trimming the fat in your organization.
Shop practices and procedures are another area with significant cost reduction potential. Each individual studio exhibits its own potentiality, so there is no need to go into any mechanics about the process here. Suffice it to say that looking at your operation dispassionately, and with a clear eye can sometimes uncover huge savings. Another approach is to query your vendors, the folks who sell you your materials and supplies. They visit a lot of studios, and they have eyes. But one thing they aren’t going to do is butt into your business without first being asked. You might even find yourself honored by a visit from one of their service technicians, who will give your business a thorough going over. So, when it’s all said and done, just remember to keep an eye out for those dollars and quarters lying around. They are everywhere.
Just one further example: any shop with as few as two hourly people on the payroll can recover the cost of a time clock in less than three months. Try it.