September eNewsletter

Some Cost-Saving Ideas From An Expert
By Neil Mavis, Expense Reduction Analysts
As a small business, you are likely relying on more than earnings growth to improve the bottom line. Your everyday overhead expenses hold the key to finding much-needed funds. Listed below are some simple steps you can take to find extra money within non-core expenses - leaving you well staffed and ready to compete when the economy recovers.

Consider couriers. Understand how your couriers charge. Local services may be best for early-morning deliveries, while worldwide carriers such as FedEx and UPS may offer lower prices for local delivery of letters and packages scheduled for later in the day. It also may be possible to replace overnight express services with two-day services or ground services; and establish a daily pick-up time rather than call for frequent package pick-ups during the day.

Centralize purchasing. You may be buying the same goods from different suppliers, particularly if each department has its favorites. By centralizing purchasing, you maximize discounts through bulk purchasing power. Also, the more items you can purchase from the same supplier, the fewer invoices you need to process. For example, many office supply companies now offer digital printing, coffee services and break-room supplies. Also consider using suppliers' own-brand products, which can match premium-name brands in quality but invariably at a reduced price.

Leverage technology. Take advantage of your suppliers' platforms for ordering and managing information. If they can track purchases by division or branch or department, request invoices already allocated, allowing your Accounting Department to concentrate on revenue-producing activities. Also, ask whether ordering on a less frequent schedule (for example, twice a month instead of weekly) would reduce your suppliers' own administrative costs - savings you can ask them to share with you.

Clean up. Are factory items such as mats cleaned more often than necessary? You may be able to reduce the frequency of cleaning and still maintain safety standards. Are garbage dumpsters emptied before they are full? You may be able to cut back on the frequency of regular collections and maintain acceptable sanitary conditions.

Say hello. Check whether you need, or even use, all the telephone lines you pay for monthly. Also, if you have several locations, you may be able to switch stand-alone long-distance accounts to the company's master account, which in some cases may have significantly lower long-distance rate structures. As VoIP (voice over internet) technology improves, consider switching from traditional copper-wire telephone systems to VoIP systems. You will be able to run both voice and data communications over a single network, reducing infrastructure and monthly phone costs.

Wrap it up. As an alternative to producing cartons printed with unique information (company name, for example), use less expensive plain cartons sealed with customized tape.

Watch out for automatic renewals. Contracts for leased equipment such as copying machines and printers automatically renew. This automatic roll-over is called an "ever-green clause" and it locks you into subsequent years at the same terms as the original lease. Typically, you must notify the leasing company, in writing, 90-120 days before the expiration date to avoid an automatic renewal. Service agreements, too, have ever-green clauses and need to be terminated, in writing, during a specific time window - typically 30-90 days before the expiration date. Note that the termination notification periods for service agreements and lease agreements usually differ.

Leased office equipment is an often overlooked cost category that is of particular interest to me. The contracts are complicated and I enjoy the challenge of finding savings through adjustments to rates, terms and conditions. For example, during a project I handled for Paul Wheeler, president of Accent Realtors in Tulsa, I advised Paul to terminate an expired lease and negotiate a buyout - making it possible for him to keep the copier rather than pay return shipping charges.

Neil Mavis, a SpiritBank Strategic Partner, is a Director in Oklahoma with Expense Reduction Analysts, a worldwide cost-reduction consultancy that finds average savings of 20 percent in overhead expenses. He can be reached at nmavis@expensereduction.com or 918-645-1645. 

Risks Despite Recession
By Kyle Arnold World Staff Writer

Tulsa companies founded during hard economic times find the rewards plentiful.

Tamara Walden is discovering the risk and reward of starting a new business during hard times.

The 30-year energy-industry veteran is trying to wrangle $1.5 million for a new business and Web site to sell green energies such as solar and wind to businesses.

But in times like these, finding ambitious investors and launching a business are no easy tasks.

"Obviously anytime you start a new business there is a risk, and the biggest risk we have is not getting our funding fulfilled," said Walden, one of the founders of Beautifuels.

While businesses across the nation and right here in northeast Oklahoma stay afloat, the recession of the last year hasn't been able to put out the entrepreneurial flame.

Bad times have taken their toll on employees and banks and bankrupted some local companies, but many of Tulsa's most profitable businesses were born in the ashes of recession and depression.

Local companies such as Bama Cos., shopping cart maker Unarco Industries Inc. and Frankoma Pottery were founded during the Great Depression. Fencing manufacturer Ameristar was started during the oil bust in 1982. Even Williams Cos. traces its roots to 1908, a year that a run on banks took 50 percent of the value out of the stock market.

A June report from the Kauffman Foundation showed that about half of the companies listed on the 2008 Fortune 500 list were founded during economic recessions and even speculated that the major companies of the future are getting their start as the economy faltered and now looks to recover.

The story of Bama Cos.' founding more than 70 years ago would be familiar to many who have been impacted by unemployment, tight credit markets and the stumbling economy of the last year.

Henry Marshall couldn't make ends meet growing sweet potatoes, so his wife Cornelia "Bama" Marshall headed to town and found a job at the local drug store.

Then son Paul Marshall, with slim job prospects himself, took a gamble and opened his own manufacturing facility in Tulsa, selling simple but irresistible pies from his mom's recipe.

That was 1937 in the midst of the most drastic economic downturn in the country's history. But today that little pie-making outfit has grown into 1,500 employees and sells to the behemoths of the food industry including Wal-Mart, McDonald's and Yum Brands.

"Dad and Mom would always talk about the Depression," said daughter Paula Marshall, who took over the company in 1985. "He hated borrowing money from anyone. When my father retired in 1985, we had no debt. And my philosophy today is the same."

There is no data yet on what the last year has done for entrepreneurship, but Sean Griffin, who chairs the Collaboratorium in Tulsa, said the organization has seen a major increase in applications for the business resource center since it was founded earlier this year.

"Right now we are about to expand into another floor and it's only been four months," Griffin said.

Economic recessions have an interesting impact on entrepreneurship because of competing forces stifling and encouraging business startups, said Larry Wofford, chairman of the Entrepreneurial Studies and Business Enterprise program at the University of Tulsa's Collins College of Business.

"When the economy is like this, it's much harder to get an idea and find customers," Wofford said. "Existing companies are having troubles getting customers, so a new company would have an even harder time."

Business startups might also have trouble finding capital from investors or loans from banks. Decreasing home values have also eliminated thousands of dollars of net worth for many Americans.

Sometimes, as is the case of Wagoner's Unarco Industries, the desperation of hard times leads to innovation. The company got its start in 1937 when grocery store owner Sylvan Goldman invented the modern shopping cart in Oklahoma City as a way to get customers to buy more products.

The first shopping cart was made from a folding chair and soon Goldman launched his own shopping cart factory, known today as Unarco Industries.

Goldman is long gone, but the company's innovation now comes under the sway of Berkshire Hathaway Inc. and investment guru Warren Buffett.

In the early 1980s, when the price of oil dived and severely strained the Oklahoma economy, Tulsa's Eddie Gibbs was hoping to set up his own manufacturing operation and make an improved hinge for fence gates.

"I started the manufacturing business in the fall of 1982, and we struggled a couple of years," said Gibbs, owner of Ameristar Fencing, which has more than 500 employees in Tulsa. "Then the guy that bought my old company went bankrupt and couldn't pay me the rest of the money he owed."

Ameristar started manufacturing hardware for wooden fences, but Gibbs and the company got its big break when it started making security fencing for government projects.

Within a few years, the company's original core businesses, hinges and hardware, had all but disappeared as Chinese manufacturers took much of their business. Now the vast majority of business comes from ornamental and security fencing.

Memories of past hardships haven't made Ameristar immune from recession. The company's business has dropped about 15 percent in the last year and it has laid off about 60 workers, although Gibbs is proud that all of those workers were new hires.

"But we are still going to make money this year and compared to the market and the other manufacturers in any other industry, we are making a profit," Gibbs said.

Read this article online at TulsaWorld.com. 

5 Business Expenses NOT to Cut
From Bankrate.com

When cash flow is tight, you may need to reduce expenses to keep your doors open. For some businesses, panic sets in almost immediately when sales begin to slump. "The natural tendency is to look for any and all places to cut expenses," says Dennis J. Ceru, professor of entrepreneurship at Babson College and owner of the Strategic Management Associates consulting firm.

But cutting the wrong expenses can cost you money.

Here are five expenses not to trim.

1. Hold the mayo, not the marketing. Even during an economic downturn, you want to lay the foundation for expansion. If you continue advertising, you'll be poised to pick up new customers when the economy begins to turn around.
   
   Make sure your advertising reaches your potential clients. Conduct research to find relevant, targeted Web sites to get your name in front of your audience without cutting advertising altogether.



2. Don't terminate training. Training can save money and help you build a better work force. In addition to training work skills, train your people to build relationships with their fellow employees and customers. Teach employees to resolve problems by going directly to co-workers instead of gossiping or complaining, says Roxanne Emmerich, author of "Thank God It's Monday."
   
   For dealing with customers, have employees answer the phone with an attitude of helpfulness. These simple changes, the kind you'd be tempted to scoff at, do make a difference and build your bottom line, she says.



3. Salary reductions are risky. If you cut salary and benefits, morale will drop, employees will feel devalued, may not perform well, and may look for new jobs.
   Instead of cutting salaries, delay raises and expand workers' roles.



4. Safety is not a safe cut. Don't be tempted to cut expenses that keep your employees safe on the job.



5. Don't quit on quality. Using less expensive but lower quality materials and/or taking shortcuts to get the product completed faster is a bad idea because you risk an inferior product.

Uncommonly Clever Economic Indicators
by Maureen Farrel

The stock market is a foggy window on the economy. Follow the pink ties and restaurant garbage piles.

The folks who get paid big bucks to know are saying the recession is over. Then again, those are the same folks who didn't head off the latest crippling crisis swelling right beneath their noses.

Want to know if we're really on the road to recovery? Look for pink ties, says Robert Allsbrook, chief economist for Regions Bank, in Birmingham, Ala.

"Men and women wear bright colors when they feel confident, and drab beige colors when they feel bad," says Allsbrook. "Men's ties are a leading indicator because they're a very inexpensive way to change a wardrobe."

Last summer, even before Lehman Brothers fell into bankruptcy, Allsbrook says he saw muted wardrobes, what he calls "funeral clothes." And now? "Since the start of the summer, I've seen lots of men wearing pink and fuchsia colored ties," he says. Economists have access to reams of data and sophisticated computer models at their disposal, based on standard variables like the unemployment rate, bond yields, new housing starts and inflation. One problem with much of that data: "The stuff that people are looking at in the news are lagging indicators," says Owen Shapiro, principal at Leo J. Shapiro & Associates, which tracks consumer and investor behavior. Clouding matters further, he adds: "Many numbers have an emotional or disproportional impact on how people feel."

Even stock prices--which in theory are supposed to reflect the future earning power of the companies they track--don't do a consistently good job of calling a crash, or a recovery.

For extra enlightenment, we went looking for a slew of offbeat economic indicators. The overall message: Things aren't getting worse, but we still have a long way to go. Here are some highlights:

Telecommunications Infrastructure
Dave Maddox owns and operates communications towers leased to wireless operators like Sprint and T-Mobile. Each of his 10 towers (what your cellphone talks to in a given area) in the Los Angeles and Boston metropolitan regions can service up to 10 different carriers. This summer, he set up four new base stations for four operators looking to expand their coverage areas--the most activity he's seen in several years. That kind of cap-ex spending portends a rebound, he says.

Christie's Autumn Wine Auction
Of all items auctioned at Christie's, wine may be the best proxy for economic activity. That's because--unlike rabid, 17th-century-furniture collectors, for whom price might be no option--wine bidders are often speculators looking to buy low and sell high, explains Heather Barnhart, the auction house's senior vice president and regional director for the Americas. In September Christie's moved $2.6 million worth of vino, nearly double last year's volume. "I think it's a great measure of people's overall confidence," she says.

The Size Of Restaurant Garbage Piles
Americans are eating out again, and that's a good sign. You can see that trend in the size of the garbage piles behind restaurants, says Sam Firer, a consultant for the Hall Company, a restaurant advisory. "The garbage is not from what people have eaten, it's from what you use to make the food," says Firer, whose clients include New York's B.R. Restaurant Group, which owns Dos Caminos, Blue Water Grill and Blue Fin. After a rough 2008, he adds, "this summer it was stinky [of garbage] again."

Another good sign: One of Firer's clients, Alicart Restaurant Group, is opening a 6,000-square-foot Carmine's Italian restaurant in Washington, D.C. "And they're conservative folks," says Firer.

Denim Sales
Denim offers a dependable take on the economy, says Marshal Cohen, chief industry analyst at NPD Group, a market research firm. Reason: Jeans are a relatively cheap investment and one of the first things consumers buy when the economy starts to bounce back. While overall apparel sales have slumped, denim sales have already started to pop: For the six months from January to June, denim sales jumped 5.3 percent to $7.6 billion vs. the same period in 2008.

Hotel Cancellations
Last winter no one wanted to keep a date with the MGM Mirage in Las Vegas. Cancellations at the company's meeting and corporate events department spiked by more than 50 percent between October 2008 and March 2009, says Dan D'Arrigo, executive vice president and chief financial officer. "We couldn't drop prices fast enough to keep our space filled," he adds. By early April, cancellations had slowed down, and by August, the rate was about 20 percent (in ordinary climates it hovers in the mid teens).

More good news: In the past three months, major event planners are booking space for 2010, 2011 and even 2012. "We couldn't get meeting event planners to take our calls earlier this year," says D'Arrigo.

Read this article online at Forbes.com.