By DYAN MACHAN
Belt tightening: In the immortal words of Yogi Berra, it's deja vu all over again. The good news is that, since the last startling economic dip, many small businesses have had time to figure out some great ways to slim down without painful diets. We asked a number of entrepreneurs and business-school brains about their ideas for cost cutting. Among the selection of companies we contacted, which had an average of 41 employees and $7.9 million in revenue, we calculated their collective savings after expenses at $74,659 a year. That's enough to add a few bucks to their bottom line. And for readers who get similar results, it could be a 1.5 million percent return on investment on $4.99, the price of a U.S. newsstand copy of this magazine. (Subscribers do even better.)
Here, some ideas from our brain trust:
Cut card costs
Tom Auer, president of Bearse USA, a Chicago industrial sewing company that specializes in heavy-duty jobs such as military gear, needed to speed up payment from customers during the 2008-09 slowdown. So he encouraged them to pay with credit cards. But he was nonplussed when he looked into the fees he was being charged by merchant credit card processors. "I have a graduate degree, and I couldn't figure out how these bills were calculated," Auer says. Drilling down, he learned that the fees involved hidden costs and convoluted contracts, and the firm was charged as much as 3.5 percent of some of its transactions.
Though many proprietors don't realize it, these fees aren't set in stone. "When you hear the word fee," says Caroline Daniels, a Babson College professor of entrepreneurship, "insist on negotiating."
There are other options too: FeeFighters is one of several processing-fee comparison services for merchants. Using the free service, Bearse, which takes in about $7 million in annual revenue, has been able to save as much as $10,000 a year on what it once had to pay in credit card processing fees, according to Auer. Saving 40 percent is typical, says Sean Harper, FeeFighters' founder.
Make power plays
A variety of start-up companies will help businesses fight off vampires -- not the blood-sucking kind but the electrical ones that run up big power bills. Water coolers, computers, vending machines and photocopiers are big offenders, because they tend to be left on 24/7; some appliances even guzzle power when turned off. In a bid to stop such power drains, ThinkEco, in New York City, has developed what it calls the modlet, a device that fits into the space between your appliance's plug and the electrical outlet. The modlet monitors and analyzes a business's energy-eating habits and makes it easy to shut off vampire appliances when they aren't being used. ThinkEco says a typical 10-employee company paying 15 cents a kilowatt-hour would pay $490 for the modlets and save an estimated $3,500 over five years by eliminating energy used during out-of-office hours.
Who Needs a Lawyer?
When Cynthia White of Design Photograph, a photography and video firm in Cleveland, added more employees, she needed legal help with manuals and contracts. But instead of going to the local lawyer she has used for years, she turned to Rocket Lawyer and paid a monthly $40 fee. Says White, "You fill in your information and it spits out the documents"; she estimates the website saved her several hundred dollars. There is similar help available at other online legal-services firms, including LegalZoom.com, and small businesses are increasingly using them to deal with tasks like completing business-formation paperwork; filing for trademarks, patents and copyrights; and making corporate name changes.
But lawbot sites have their limits. Even advocates of the low-budget options say that incorporation rules, for example, involve enough quirks to justify a one-on-one meeting with a lawyer. And if a copyright or patent is key to your business, experts recommend having a flesh-and-blood attorney review the online work. Some clients have run into mix-ups on this matter; LegalZoom CEO John Suh, for one, says his company now offers attorney review to subscribers.
Another company, ThinkLite, of Boston, has the compelling strategy of coming to your business to screw in new energy-efficient lightbulbs as a retrofit for free. ThinkLite takes money only after you start saving energy, says cofounder Dinesh Wadhwani. The Longfellow Club, a fitness center in Wayland, Mass., says it's saving $15,000 annually in electricity bills after the ThinkLite installation, and it doesn't expect to have to do any maintenance for the next 12 years.
Ship for less
Big companies have always snagged discounts on their shipping costs, but there are logistics firms that will help little guys get the same deals. Salt Lake City's Unishippers, with nearly 300 franchisees, is one of the bigger players. Jeff Fritz, purchasing manager for Diamond Water Conditioning in Greenville, Wis., says his family-owned firm, which registers about $4 million a year in sales, saves from 10 to 30 percent in shipping costs, or roughly $11,800 annually, using Unishippers instead of paying carriers directly. For instance, shipping one of Diamond's 725-pound, spot-free car-wash rinse systems to Tennessee would normally cost $250 but was less than $200 using Unishippers' online customized software. Fritz can punch in what he needs to ship, and the program will show 10 freight carriers and their prices for the job.
Reduce expenses on expenses
If time is money, then saving time can help a small business -- especially when it comes to the dreaded task of filing expense reports. Sebastian Blum, who does business development for Palo Alto, Calif., software developer Cooliris, travels every few weeks. He used to spend hours catching up on his reports. "At least half that time was spent trying to reconstruct where I was" and tracking receipts, Blum says. Now when he's on the road, he uses the services of Abukai, an expense-tracking software firm based in San Francisco. Using Abukai's smartphone app, Blum takes pictures of his receipts; they get uploaded and automatically generated into an expense report. "Our controller can see my report before my suitcase is unpacked," Blum says.
Cooliris estimates $40,000 in annual productivity savings for the eight employees using the system; new users typically have less than $2,000 in start-up costs. Daniels, of Babson College, thinks small businesses with limited cash can significantly benefit from any product that gives a more accurate view of expenses. "It's good to know your numbers," she says.