How To Cut Costs and Unnecessary Expenses

Cutting Your Costs & Expenses

While the majority of my Coaching focuses on developing new ways to build your business, it’s important to
that the one guaranteed way of keeping more money in your bank account is by doing everything
in your power to cut
costs at every available opportunity.  Sounds simple, but studies have shown that a large
number of businesses operating
today are nowhere near maximizing their cost saving opportunities.


Why is cost cutting important?

This may seem like a fairly obvious question, however, there have been countless successful businesses that
have failed because they let the costs of operating their business spiral out of control.  In fact, some of the
biggest global corporate collapses have occurred due to this very reason.

So, if it can happen to billion dollar corporate giants it can happen to small businesses.  It’s one of the main
reasons why 80% of all businesses fail.

Cost cutting can be a very quick way to boost your bottom line in the short term.  By shedding staff or
improving the systems in your business you can immediately impact your profitability.  Constant focus on
cutting costs will encourage you to review your policies and practices more often than you otherwise might
consider doing.  Another key advantage is that it can improve your ability to raise capital.  If you’re
approaching a bank, angel investor, venture capitalist or even your next-door neighbor, showing that
you’re constantly focused on cutting costs will be seen in a very favorable light.

Being an effective cost cutter can also shelter you from a downturn in demand for your product or service.
It’s very easy to live the good life when your business is making good profits. But remember, what goes up
must come down.  It’s simply good business sense to reduce costs at every available opportunity.  Last,
but certainly not least, is that it keeps you in control.  Isn’t that what it’s all about, being in control of your
business and not the other way around?


Where to Start?



Probably the best place to start is to look at how your business is currently being financed.  If you have an
overdraft, when was the last time you seriously shopped your business around to different banks? Too many
Business Owners fail to recognize that the banks are now becoming more and more competitive.  This means
that if you approach a number of different banks (preferably with an up to date business plan) and
ask them for the best rates they can offer, you will often find that you can secure cheaper interest rates on
your overdraft.  If you’re in the fortunate situation where you have surplus funds in your business bank
accounts, talk to your bank manager about offsetting these funds against your mortgage or depositing them
in a short-term, high-interest yielding account.



The same is true of your suppliers.  When was the last time you sat down with them and attempted to
negotiate better payment terms or an improved volume discount? Remember, it’s the squeaky wheel that
gets the grease.  You should sit down on a regular basis and analyze all of your suppliers.  Make sure you
competitively quote your suppliers for everything your business needs.  You will be amazed how quickly
people will negotiate with you.  Remember, it costs six times more to find a new client than it does to do
business with an existing one.  Your suppliers know this and simply asking them for better terms or
cheaper rates can save you a lot of money.


Trading Hours

Have you ever sat down and had a close look at your hours of operation? There are countless businesses
that open too early or stay open too late just because that’s what everyone else is doing.  Have a closer
look at when you are making the majority of your sales or when you receive most of your customer
enquiries, (the daily journal in the Time Management section will help you to track this).  Once you have
done this for a few weeks, it will become apparent that there are certain time periods that are costing you
money simply to be open.  For a lot of retail stores this can be between 9 and 10 on a Monday or Tuesday
morning.  Even if you reduced your work week by these two hours, that can represent a savings of over
$1 or $2 thousand dollars over twelve months.  Enough for a holiday or a basic website to further
promote your business.


Staff Remuneration

Is there a better way you can be rewarding your staff? A lot of Business Owners are now looking at
restructuring the way they pay their staff in order to reduce costs and provide greater incentive for
greater output.  It is a well known fact that salespeople have been paid increased commissions based
on increased sales for many years, but there are a growing number of astute Business Owners who are
now starting to pay their other non-sales people based on the level of sales an organization generates.
This has the effect of having everyone focused on increasing sales so it becomes a far greater team
effort across the board.  Companies that have started to do this have noticed an increase in customer
satisfaction levels, faster delivery times, more efficient debt collection procedures, greater efficiency
in communications, a higher level of office morale and countless other benefits.  Is there a way you
could look at doing something similar in your business?


Business Premises

Where you choose to locate your business will have a major impact on your operating costs.  It is one
of the most important things to consider, even if your business is well established.  When looking at
locating or relocating your business it’s important to ask the following questions:

  • Will customers be coming to the business or will I be going to them?
  • If customers are visiting me, what impression do I want to create?
  • Where do my customers come from?
  • Do they need easy parking facilities?
  • Do I need to be highly visible?
  • Will I be employing staff?
  • Is it easy for staff to find car parking or public transportation?
  • How far away are your business premises from where you live?
  • Does your business require partitioning? Offices? Storage space?
  • Can you access your business premises after hours?
  • What is your budget?
  • How long is the lease for?
  • What happens if I break the lease?
  • Is it better to buy the business premises?
  • What are the incidental costs? Cleaners? Outgoings, etc?

When you’re thinking of locating your business you need to be very clear on all of the above questions.


Eliminate The Invisible!

Once you have had a close look at some of the major expenses in your business, its then time to have a
very close look at invisible expenses.  These are the incidentals you may be spending money on which
your customers or staff are indifferent to.  A lot of Business Owners spend money on incidental items
that don’t really add any value to the business.  Have a look at the following list of items and ask yourself
if they would really be missed if they disappeared from your business tomorrow.

  • Magazines and newspapers
  • Expensive tea and coffee
  • Couriers and express post services
  • Expensive packaging
  • What are some of the items in your business you could be living without?


Cost Cutting Tips And tricks

Cash Management

  1. Pay no bill before its time. Don’t pay any bills until they’re due. See who has a late charge, and who doesn’t.
    Send checks out on Friday to take advantage of the weekend “float.”
  2. Exercise dormant lines of credit. Frequently business owners set up lines of credit they don’t use. The bank
    may drop your line of credit if it is not used for a certain period of time, so be sure to check their use
    requirements. If there is an annual cost, such as 1%, many business owners consider dropping a line of credit.
    But remember the rule of banking: If you really need the money, you probably can’t qualify for the loan.
  3. If you don’t have a line of credit, set one up now. Check around for competitive rates. It’s a lot cheaper than
    using credit cards if you’re really in a cash flow pinch.
  4. Closely monitor your three sources of cash:
  • Appraisals in process, not yet completed
  • Appraisals billed out, but not yet collected
  • Paid billings: cash on hand
  1. Complete and bill out appraisals as fast as possible. The sooner they’re billed, the sooner they’ll be paid.
    We’re all tempted to “let the work fill up the time available.” But, it delays payment of your bill. If they don’t
    have the appraisal, they won’t pay the bill.
  2. Give your associate appraisers a higher fee split if they’re willing to wait to be paid until you’re paid for
    appraisals. This policy can be a substantial help to cash flow problems as the highest percent of expenses is
    appraisal labor.
  3. Be very aggressive with past-due accounts, particularly non-institutional companies, such as Mortgage Brokers.
    With many Mortgage Brokers expected to go out of business, and both Mortgage Bankers and Brokers having
    cash flow problems, let them be late paying someone else, not you. In collections, the “squeaky wheel gets the
    grease”. Call every day if necessary.
  4. Get interest on your money by setting up a “sweep” accounts or interest bearing checking accounts, and doing
    daily deposits. Even if it’s only two or three percent interest, it’s better than nothing.
  5. Get as many pre-payment or COD’s as possible. Offer a discount, if necessary. Require pre-payment from
    private clients, or business clients that may cause payment problems. If they won’t pre-pay or COD, turn
    down the work. Don’t work for free.

Rent – Office and Storage 

  1. Renegotiate your lease to a lower rent, or a temporary lower rent while business is slow. If office vacancies
    are high, your landlord will probably prefer reduced rent to no rent.
  2. Sublet unused office space to appraisers or non-appraisers. Or, move out of your larger office space to a
    smaller sublet office. See the June, 1994 issue’s article on shared office space.
  3. If you need to move or downsize to a smaller office, but have a lease, work with your landlord. Maybe he
    or she will let you sublease, make a partial payment of the rest of your lease, or move to a smaller space.
    In most parts of the country, the office market is not doing well, and landlords are willing to negotiate.
    Negotiate with the landlord for some type of compensation for phone and electrical improvements you
    have made and paid for, but will have to leave behind when you move.
  4. Move “back home” and work out of the garage, spare bedroom, or even the dining room table. If you think
    it’s too cramped, consider it only temporary until business picks up again.
  5. Shop around for low-cost storage space. We have to save our files for at least 5 years, and many of us save
    them for much longer. What to keep and throw out in files is an individual decision, but you can shop for
    a lower storage cost.
  6. Get rid of excess stored stuff, such as old office furniture. Sell it or give it away. Don’t pay storage costs
    for things you really don’t need. Don’t be a packrat.


  1. Keep close track of your competitor’s costs. Don’t underbid or lose work because you overbid. When fees
    are changing, don’t get left behind and lose valuable assignments from overbidding, or income from
  2. Don’t offer lower prices to a client that isn’t price sensitive. Why give away your profits? Not everyone
    gives assignments to the low bidder. Some don’t even do competitive bidding.
  3. Know your costs on appraisals. The high fee jobs may not be the most profitable. It may be more profitable
    to set up referral alliances with appraisers in other geographic areas, rather than spend the time traveling
    and doing extra research on an area you’re not familiar with.

Dues and Publications

  1. Carefully review each organization where you pay dues. Do you really participate, or do you send in dues
    because “you always have.” You can always rejoin later, when business picks up if you feel guilty about
    dropping out.
  2. Review the publications you subscribe to. If a publication doesn’t really help you in your business,
    consider not renewing.


  1. Cut back principals’ salaries. Pay yourself last, after paying all other expenses. Although this may seem
    obvious, many companies have developed serious financial problems because the owners kept taking
    out large salaries.
  2. “Lease” your employees. Instead of laying off an experienced secretary, lease him or her to another
    company until business picks up again.
  3. Use temporary help whenever possible when your business substantially increases. That’s how the
    mortgage lending industry handled the 1991 to 1993 substantial increases in lending volumes. They
    first let go the temps, then the permanent employees.
  4. Use part-time support staff. They don’t require benefits and usually have more flexible hours. Laying
    off a part-timer, or cutting back their hours, is much easier than a long-term loyal, full-time employee.
  5. Have a cost cutting brainstorming session with your associates and support staff. If you’re working
    alone, set up a lunch with your accountant or other appraisal business owners to swap ideas. You’ll
    get many ideas you’ve never thought about before.
  6. Have one person attend a seminar, and then later “show and tell” the rest of your staff. For example,
    we all want to find out about the new USPAP changes, but the seminars are expensive. Just send one
    person, who gives a “mini-seminar” to your other associates and yourself.
  7. Attend only local seminars to eliminate travel costs. If there’s an out-of-town seminar you want to
    take, call the sponsor and see if it will be offered locally. Or see if you can purchase audio cassettes
    or video tapes.
  8. Use an outside payroll service such as Paychex or ADP to cut bookkeeping payroll costs. Or, do it
    yourself by using a simple software program like Quickbooks. Don’t use a CPA to do your bookkeeping.
  9. Broaden staff responsibilities. For example, instead of paying an outside bookkeeper, have your secretary
    do it. If you have to lay off a full-time secretary because your work has dropped, consider letting a less
    experienced associate appraiser do part-time clerical work. At least they’ll have some income. Instead of
    having outside firms do janitorial and delivery services, have your employees do it. It’s better than getting
    laid off, or sitting around worrying about getting laid off.
  10. Cut your FICA and FUTA by setting up non-cash compensation, such as a “cafeteria” benefits plan with
    such benefits as health insurance and paid time off.
  11. Use college interns or co-op students for research, setting up databases, etc. They work for credit or a
    low salary on a short term basis and can work on specific projects, or on general research.
  12. Get free or low cost consulting from a local college business school’s small business consulting programs,
    or the SBA’s SCORE (Senior Corps of Retired Executives) program. They can give you advice on such
    topics as Marketing, Collections, and Cost Accounting.


  1. Be sure you’re not overpaying for workers compensation. How are your appraisers classified? They are
    relatively low risk for a claim and should be classified as real estate agents or some other category, rather
    than as much more expensive inspectors. If your insurance company insists on classifying them in a high
    rate category, change insurers. If this year’s workers comp is based on last year’s employment, be sure to
    notify your insurer if this year’s payroll is expected to be lower.
  2. If you have high production typists, be sure to minimize repetitive stress to avoid workers comp rate
    increases, if one of them becomes disabled. Contact your workers comp carrier for more information.
  3. Look at your auto insurance coverage. Consider dropping collision on older vehicles. If the car is only
    worth $1,500, why pay $200 per year extra for collision?
  4. Raise deductibles on such coverage as auto collision, disability, property/casualty, and liability insurance.
    For example, have disability insurance “kick in” after 90 days instead of 30 days.
  5. Evaluate all your insurance policies for their risk/benefit, and decide which ones you think you will
    really need … Don’t over insure …


  1. Don’t overpay your income tax quarterlies. If you anticipate that your taxable income will drop this year,
    don’t pay taxes based on last year’s income. Work with your accountant to pay quarterlies based on a
    more accurate estimate. If you’ve already overpaid your quarterlies, ask your accountant about a quick
    refund, using Forms 4466 and 1138.
  2. Close to year-end, schedule a tax-planning meeting with your accountant to shift income and expenses.
    For example, shift income into the next year to decrease this year’s taxes.

Office Supplies

  1. Shop for the best prices. Don’t pay too much attention to percent discount. Look at the bottom line.
    No one pays full retail. Purchasing supplies in bulk may be worthwhile.
  2. Use office warehouse companies like Office Club. They usually offer the lowest prices. Many will
    deliver. Don’t forget discount stores like Price Club, Wal-Mart, and Costco. Many carry some of the
    most-purchased office supplies, like paper, pens, and laser jet cartridges. You don’t always need to
    buy brand names.
  3. Keep close track of inventory so you don’t have to pay someone to “run over” to the nearby
    high-priced office supply store.
  4. Lock the supply cabinet. Yes, this will cause grumbling. Explain that it will keep it neater,
    and you’ll be less likely run out of supplies.
  5. Use fax instead of U.S. mail whenever possible. It’s cheaper and faster.
  6. Use the back side of old copies for rough drafts to cut your paper costs.
  7. Cut “post-it” pads into smaller sizes to use for page markers. Or, have your photo processor do it.

Equipment and Phones

  1. Sell or donate excess office furniture and equipment. Storage space is expensive. You can sell it to
    employees, the public, or the vendor (on consignment). Donate it to local charities or schools.
  2. When leasing equipment, get an option to cancel due to closure or consolidation. Don’t get an
    “evergreen clause”, where the contract always continues unless you give 30 days notice. They are
    difficult to cancel, as the expiration date is hard to monitor.
  3. Renegotiate your equipment leases. For example, change to a smaller copier. Buy shorter maintenance
    agreements, so that, for example, if your copier volume is lowered, you can decrease maintenance.
    See if you really need all your service contracts. Maybe its better to pay for repairs on an ad hoc basis.
  4. Reduce phone lines. If you have fewer staff, you need fewer phone lines. Cancel some of the optional
    features you don’t really need.
  5. Make long distance calls and fax during off peak hours. If you’re on the East Coast, make West Coast
    calls after 5 P.M., when it’s only 2 P.M. on the West Coast. Conversely, on the West Coast, make your
    East Coast calls before 8 A.M.

Here are some additional considerations …


  1. Go Green (Smartly)
  2. Virtual Support
  3. Spending Wisely On Advertising
  4. Free Conference Calls
  5. Really Cheap Office Space
  6. Join A Trade Exchange
  7. Downsize Your Office Space
  8. Go VOIP
  9. Interns
  10. Print Your Own Business Cards
  11. Make Good Decisions
  12. Simply Do It Faster
  13. Cut The Advertising & Get Social
  14. Cheap Website (But Not Cheap Looking)
  15. Smart Marketing Strategy
  16. Get In Their Face
  17. Source With Disabled Organizations
  18. Jump Start The Accounting
  19. Recycle
  20. No Paper = No Cost
  21. It’s All About Your Temperature
  22. Talk About Smart, Simple & Easy
  23. They’re Smarter Than You
  24. Make It In 4D
  25. The Interns Are Social Mavens
  26. This One Rings True
  27. Free Admission
  28. Look At That Mug
  29. Let Them Eat
  30. Smarts 101
  31. Bottom Line Productivity
  32. Sharpen The Pencil


All of these 32 suggestions, I wrote a paragraph of content for … I didn’t include them here, because I didn’t want
to write a book … With that said, here are my final thoughts, and they consider an actual expense and costs audit …


Plans make difficult situations easier to handle

Chances are, if you’re looking for ways to save money in your business, there’s a specific cause. Whether it’s the
state of your business or the direction you feel the economy, or
your industry is going, it’s likely an overwhelming
and emotional time. That’s even more
reason to take a measured approach. Take a deep breath, review each area
one by one,
and stay creative. You’ve got this!


Here’s To Your Success!


Dave Smith
Business Coach & Marketing Strategist

IMJustice Marketing





How To Cut Costs and Unnecessary Expenses


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