Cut the fat to increase the bottom line

score Question:
Being in the retail business, I am continually hammered by competitive pricing. I don't know how some of these people stay in business. I've looked at many ways to reduce selling prices to remain competitive. What can I do now?

Answer:
Small businesses and big businesses have one thing in common: If they want to be successful, they have to keep costs under control. Look at how many mergers we have, and the first thing that is said in justification is, we can reduce costs X-thousands of dollars.

One way to do this is to continuously figure out how to trim fat. Wal-Mart does a good job of conveying this message through its ads that show prices continuously dropping. This is an idea that isn't lost on their small competitors. In a recent survey conducted among small firms around the country, everyone agreed that cost control is critical to success.

How do you control costs? One way is by getting the best possible deal from your suppliers. Of course this is nothing new, every small and medium size business said that this was part of their strategy. It's a no-brainer.

and if everyone is negotiating for the best deal, where's the price advantage? In truth, there typically is none for many small firms because they can't buy in sufficient volume to get the lower prices that their bigger competitors, buying in larger quantities, can negotiate.

So how do you but your costs? By looking in to areas where you can trim expenses. Some of the best - and often overlooked - cost-trimming measures are found by examining the way you do business.

Here are some examples drawn from the survey:

  • A shipping and receiving department found it was able to cut 25 percent of the time needed to load and unload its trucks and those of suppliers and customers that same to the site to pick up goods by simply restocking its shelves and transferring fast-moving merchandise to the front of the warehouse near the loading area.

    Why hadn't this been done before? Because years ago, the company set up its restocking system based on what was selling fastest and never got around to revising the system. It wasn't until the firm hired a new warehouse manager who matched up the computer printout weekly sales with the location of the merchandise in the warehouse that the restocking began.

    Not a highly sophisticated solution, but it saved the company plenty of money.

  • A small retail store asked its customers what they would like to see differently that would make shopping there easier. The reply, perhaps surprising, was to widen the aisles and make it easier to walk around. The firm did this by dropping slow-moving items and opening up the spaces. Sales increased by 18 percent in the first 18 months.

In the first example, the company made it faster to load and unload the trucks, thus saving money. In the second, the store makes it easier to shop, thus increasing the revenue.

This is what all small business need to do to compete.

You may not have the above problems, but if you examine your operation, I'm sure you;you'll find areas where costs can be reduced or eliminated. You just need to look. and if you don't want to do it yourself, consulting firms can do it at a price. Or better, try asking your suppliers, they visit a lot of stores, and many have very good ideas about what it takes to be successful.

Bill Bryan is a counselor with the Service Corps of Retired Executives. SCORE offers counseling, workshops and seminars on small business operations. You can reach Bryan through SCORE, 515 N Court St. 815-962-0122, for information and appointments.


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