Posts Tagged ‘save’

Save Business Cash Flow By Renting Shadow Office Space

June 15, 2010

by Doug Smith, President, The Woodhaven Group

A few years back the sales of your company was showing a large increase.  You were anticipating even more growth beyond the original financial plan.

So you did what a lot of managers did at the time.  You rented more office space to accommodate more employees.  It was an exciting time for everyone.

Then the bottom fell out of the economy and you did what you had to do……..eliminated employees to reduce expenses.

What was left was unused office space.  This now unneeded space is referred to in the commercial real estate industry as  shadow space.  You are still paying rent but it is not being used any longer by your company.

There is a solution to this problem.  Aggressively seek out other business people needing office space.  In many cases this may be one person proprietors that were layed off from their own companies and need office space to start a new venture but cannot afford prevailing rental rates.

Where do you find these prospects?  Try the following sources who will know businesses needing space:

  • Outplacement firms
  • Chambers of Commerce
  • Associations
  • Small Business Adminstration
  • CPAs
  • Insurance Agents
  • Networking Groups

You can negotiate short-term rental rates that will cover a substantial portion of your own rent payment.  In some cases if you originally negotiated well,  the rent charged may be above what you are currently paying.  Then add-on for office furniture (you probably still have some of that on hand too) and utilities.  There might even be an opportunity to offset the cost of your receptionist.  Throw in a charge for the use of conference rooms that can be scheduled around your own meetings and now you have turned a problem into a source of positive cash flow.

Effective use of shadow space can become a win-win situation for both your company and the new start-up entrepreneur.

Use this cash flow strategy the next time you find yourself with unused office space from having downsized your company.

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Save Business Cash Flow With Smart Use Of Employee Overtime Hours

June 14, 2010

by Doug Smith, President, The Woodhaven Group

Consider this scenario.  Your company has had to operate through an extremely bad economy.  As owner or CEO, you were proactive  by reducing expenses to bring the breakeven of the company in line with reduced sales.  This reduction in expenses included eliminating employees.  Tough decisions to make but, looking back, it was obviously the right thing to do to maintain positive cash flow.

Does this sound familiar?  You are not alone.  A lot of good managers had to make the same type of decisions over the past 2 years.

Sales are now beginning to rebound and while progress is slow, it appears the worst days are behind the company.  Now the question becomes…… do you hire new employees to replace the ones you eliminated?

Here is what I have done after other economic downturns that required staff reductions.  Before hiring additional hourly workers or non-exempt employees do this instead.  Take the current employee group and give them overtime hours.  There are 6 benefits to doing this:

  1. It puts additional dollars in the paycheck of your key hourly or non-exempt employees.  They will appreciate the extra dollars coming their way.
  2. You will not have to spend valuable cash to recruit and interview replacements.
  3. There will be no new training cost since there will be no new hires at this time.
  4. There will be no added workmens compensation insurance nor employee benefit cost incurred without new employees.
  5. Most new hires make mistakes that costs the company cash during their ramp up period.  This potential expense is eliminated. 
  6. If the increased sales is not for real then you do not have to cut back employees again. 

Once you see the new sales increase is going to continue and overtime dollars grow, then it will be time to hire added staff. 

Until then you have saved cash, your company has survived, and there is a happy group of employees ready to grow the company into the future.

Outsourcing Can Save Time And Increase Business Cash Flow

June 3, 2010

by Doug Smith, President, The Woodhaven Group

If your company is not considering outsourcing some of your everyday business  functions then you are missing out on a golden opportunity to increase your business cash flow.   

Most individuals outsource many of their personal activities and don’t think twice about it.  You can have someone else fill the cavities in your teeth, repair the engine in your car, or even make coffee for you every morning.  Hello Starbucks!  Think of the opportunities to outsource important daily functions in your company such as payroll, cleaning, accounting, IT, invoice billing and processing, human resources, areas of marketing such as public relations, web design, pay-per-click, SEO, media buying and even the call center.  One important area that has been getting outsourced for some time is the manufacturing of products and component parts.

Is it really worth considering for your company?

The benefits are many and the savings  bring more cash into the company to help drive marketshare of the all important core products.  Here are just a few of the benefits:

  1. Less space to rent or own.
  2. Can eliminate office furniture and work stations.
  3. Can reduce the number of computers, monitors and printers
  4. Forget the telephone on that desk that no longer exists.
  5. Less hiring, interviewing and training expenses and the time that goes with it.
  6. No employee benefit cost needed for outsourced employees.
  7. Fewer people problems for your top managers to deal with which means they have more time to focus on increasing sales to your best customers. 
  8. Savings can be channeled into testing new marketing strategies to bring on additional customers.
  9. The company will have flexibility to expand or contract an outsourced function as business conditions dictate. This is a critical benefit in these uncertain times.
  10. Speed of execution.  Having specialists who live the outsourced function daily should assure that what needs to get accomplished is done more efficiently and quickly than managing it inside the company.  When I outsourced manufacturing I found that we got the finished product to the end customer 7 days faster than before.  That dramatically increased customer satisfaction and improved cash flow.
  11. Your company can build a strategic alliance with your outsource partner.  This can allow you to stay more current on technology and new processes than if you went it alone.  The partner  may even introduce you to a new customer.
  12. Quality level  of the outsourced function improves.  We already mentioned speed but when you combine more speed with better quality the company gains a competitive edge when outsourcing.  This edge includes increased  reliability and credibility in the eyes of your customer which allows the company to ask a higher price for its products. The result is more sales and increased gross margin.
  13. Outsourcing allows your management team to concentrate more on all aspects of customer service.  While this area is outsourced in many companies, I prefer to take the savings from outsourcing other functions and improve this critical function into a core competency.
  14. It can reduce the fixed cost of equipment that has to be acquired to stay current with technology, especially in the area of manufacturing.    

Like everything else in your business, the management team must constantly measure the results of outsourcing a specific area or function to make sure the expected  return on investment is being realized.  Some owners and CEOs outsource a function and forget about it. It is important to understand that outsourcing becomes another area of the company that needs to be managed in order to assure success.

Has your company had success outsourcing?  I would like to hear about your experiences.