Great article in the SMH
“I’m astounded at my skyrocketing business costs – insurance and energy alone seem to have doubled in the last year.
It got me thinking about what I need to do to dramatically cut my expenses. So I asked Aodhán MacCathmhaoil, co-founder of waste management and recycling company Waster, about his recent cost-slashing initiative. His efforts have saved the business about $80,000 in staff, rent and other costs.
What MacCathmhaoil has done is something every business owner should do but few of us have the discipline to do it on a day-to-day basis, which is our loss.
Insurance was at the top of his list. “I used to just take the first quote but I started to look at what we were paying and spoke to some of my contacts, who suggested we use a broker,” he says.
It was a smart call – MacCathmhaoil estimates using a broker for his public liability and workers’ compensation insurance saved him about $5000.
“Insurance is something you need but don’t want to pay for. But in our game you need it because if something goes wrong it can go catastrophically wrong,” he says.
Moving to a less expensive office has also saved money. Waster previously maintained offices in Sydney’s CBD. It has now moved to the western suburb of Blacktown.
“Aside from the cost saving, it’s also made it easier for staff to get to work. Getting into the city is a hassle. Now they can drive straight here rather than catch trains and buses into town,” MacCathmhaoil says.
While he still maintains a small city office, he calls it a “vanity” and says he will probably let it go in the next year or so.
Technology is another area where he has been able to make significant savings. This is especially the case for subscription services purchased from the US a couple of years ago when our dollar was at parity. They are now much more expensive.
“We did a huge cull of apps and applications. We were paying $20 a month for email read notifications, which we’ve gotten rid of now. There are lots of subscription services you don’t really need,” says MacCathmhaoil, who estimates getting rid of them has saved him $2000.
Waster has also moved to month-by-month subscriptions for software applications and has culled others. For instance, MacCathmhaoil found the business was paying for two web-hosting services and cut one.
Additionally, he’s increasingly using freelancers – even for small tasks such as note taking at meetings – to keep staffing costs down.
When it comes to cost cutting, Jesse Landry, managing director of Romulus Business Services, says often, small businesses spend big on the wrong things and go all Scrooge on items that matter.
“I’ve met more than a couple of people who went into business for themselves and decided to finance new cars. A personal trainer comes to mind, who thought he needed to be seen as successful in business when what was needed was clients. Financing vehicles is expensive and you can’t expense your costs if you’re not generating an income as a start-up,” Landry says.
Overspending on networking and business seminars that won’t deliver customers is a common problem, he says.
“If you’re developing a small business you need to ask yourself whether you really need to attend a multi-day business or networking seminar costing thousands of dollars where you also have to outlay for flights, accommodation and food,” he says.
Landry says when he queries people about this he’s frequently told, “It’s an expense write-off”.
“But I don’t think they actually understand what this means. It’s not free, it’s just less expensive than if you had paid for it out of your post-tax dollars,” he says.
Conversely, he says too many small businesses go cheap on things that matter. “I see this most frequently with their marketing and branding. You really can get very affordable branding done these days through a variety of suppliers. But I still meet people who create their own logo in a word document and then buy the cheapest possible business cards online.”
Most importantly, small businesses and especially start-ups, need to understand how fixed costs will affect their business. Financial management is a good example and it tends to be a rising cost.
“When I got into business, I was astounded at how much I had to pay to look after my BAS and taxes, and the clients we assist all tell me the same,” Landry says.