How to Reduce Expenses for Your Small Business

by Dawn Fotopulos on July 14, 2010

How To Reduce Expenses for Your Small Business is an article written by Ray Silverstein. He’s a veteran entrepreneur and a mentor to many small business owners. His common sense wisdom can save your business in this tough time. Read more….

Renegotiate Your Rent

One of the upsides of a soft economy is that everyone is hungry for business, which makes this an excellent time to renegotiate vendor agreements.

Since your rent is undoubtedly one of your largest fix expenses it’s an excellent place to start. Do you like your current arrangement?

If your lease will expire in the next few years, you might offer your landlord a longer-term lease in return for an immediate rent reduction. You may renew anyway, so why not do so now to leverage some savings?

You can even renegotiate your “CAM” costs—costs for common area maintenance. The most effective way to negotiate is to treat your landlord as a partner rather than an adversary.

For example, if your current maintenance fee is $1,000 a month, you might ask your landlord, “Will you work with me and accept $800?” Remember, something is better than nothing. What’s your landlord’s chance of finding a new tenant now if your agreement falls through?

This may require “brinkmanship” on your part.

How to reduce expenses for your small business could also include:

Renegotiate Vendor Costs and/or Terms

You can apply this same approach to vendor relationships in general. It doesn’t hurt to try. One entrepreneur who attends my peer groups crafted a letter that he sent to all of his vendors.

It read something like: “We value your services and would like to continue our relationship. However, due to the current economic environment, we find we must adjust the amount we can pay you to [fill in the blank]. In the interest of our business relationship, are you willing to work with us during these difficult times?”

Believe it or not, he got surprisingly good results. No one wants to lose good business. In addition, if you are willing to enter into longer-term supply contracts with vendors, you can lock in more favorable pricing going forward.

If you do have cash and can pay promptly, use that to leverage price discounts, promotion allowances, restocking or obsolescence charges, catalog allowances, etc.

Not rich in cash? You can still renegotiate terms such as extended payment, consignment inventory, vendor housing of inventory, etc.

Sell your vendors on the premise that by working with you, they’ll do more business. Discuss promotional allowances, product placement positioning, catalog allowances, and co-op advertising.

These strategies will help you sell more product/services—and use more of their product/services.

Ray Silverstein is president of PRO: President’s Resource Organization (, a network of entrepreneurial peer advisory groups. He also is the author of “The Best Secrets of Great Small Businesses” and “The Small Business Survival Guide: How to Survive (and Thrive) in Tough Times” ( Reach him at 800-818-0150 or [email protected]

Thank you, Ray.

Questions? Don’t Panic. At Best Small Biz, we are The Solopreneur’s Lifeline tm.

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