Tough times offer business owners the opportunity to check routine expenses

DAVE GALLAGHER

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When business activity slows down, there is one silver lining for owners: There is more time to spend on improving the business.

That seems to be a common theme I hear when I'm talking with business owners these days. There doesn't seem to be a hunker-down mentality from people I've talked to, but more of a pro-active, what-can-I-do-to-cut-expenses attitude in place.

I decided to check in with the local SCORE chapter to find out what advice they are giving these days. The organization of retired executives gives advice to small-business owners, particularly ones just getting started. Jack Kimmes, a SCORE counselor and the former owner of Kulshan Cycles, said that while they mostly get people with questions about opening a business, they still see a steady number of business owners looking to improve their bottom line.

"Quite often the questions these days are financial, and the main problem is not following through on the math," Kimmes said.

What he means is that many business people are not taking in all the factors when it comes to determining expenses. If a business wants to move into a new space, for example, owners will look at where they want to go, then look at just the lease rate. Kimmes and other counselors spend a lot of time talking about all the other expenses, including triple net (where the lessee pays for things like taxes, insurance and maintenance).

"It seems simple to do, but I can see how it gets overlooked," Kimmes said. "If you're focused on making the best cupcake you can, a person might not be thinking about things like how triple net would impact expenses."

Kimmes said there is still plenty of optimism out there, based on the people he sees each day wanting to start a business. That optimism can be tempered, however, when they sit down with a counselor and start asking questions.

The most common question is how to get money, and Kimmes doesn't have much good news to impart.

"If you don't have any money to start a business, a bank is not going to give you a loan, no matter how great the business plan is," Kimmes said. "From what I'm seeing these days, if you have $1 and a great plan, a bank might be willing to invest $3, but even that's tough right now."

Even so, Kimmes said there is a wide variety of business start-up plans out there.

"The joke is people only want to open coffee shops around here, but we're seeing business plans for manufacturing, lawyer firms and dentist offices," Kimmes said.

For the established business owner, Kimmes said one way to cut down on expenses is to shop around some of the services a business uses, such as insurance, Internet services, shipping, printing and other day-to-day expenses.

"Once every three years a business owner should see if they should make a switch; I always found it to be worthwhile," Kimmes said.

Here are some other tips that SCORE counselors are talking about:

? Check operational expenses regularly. If you analyze your profitability once a month, it might be better to check weekly or biweekly because things seem to be changing quickly these days, particularly fuel costs.

? For delivery companies, plan the driving route ahead of time, scheduling appointments in late morning or early afternoon when traffic is lightest.

? Inventory should be thought of as company cash sitting on a shelf or in a warehouse, doing nothing. It's also creating an expense when you factor in storage and insurance fees. It's a good time to figure out a way to discard low-selling items.

The local chapter of SCORE has new office space in the Washington Mutual branch on Cornwall Avenue. For more information or to set up an appointment, call 685-4259 or visit www.scorechapter591.org.

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Sunday, Jul. 27, 2008

Tough times offer business owners the opportunity to check routine expenses

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