25 Ways to Cut Costs
Ready to trim fat from your budget and add a little muscle to your bottom line? A healthy dose of these creative cost controls will help you whip the firm's profits into shape.
By R.E. Blake Evans
Perhaps your finances are a tiny bit tight. Or maybe your operating expenses have gotten a little flabby around the middle. Look at the bright side. First, you are certainly not beyond help (particularly with this article in hand). Second, you're not alone.
"Interior consultants are visually creative, great at brainstorming and they're usually skilled at project management," says Sheri Lake, ASID, president of MetroSpace Inc., in Arlington, Va. "But optimizing office operations and controlling labor are typically not our strong suit." After a pause, Lake puts it delicately. "There's a learning curve there."
Most interior consultants eventually decide it's a curve worth navigating, because design is a high-overhead business. Your brilliant ideas may come to you free, but everything else - from renting space and hiring help to finding clients and buying equipment - costs you big. So the faster you get smart about controlling costs now, the better your chances of succeeding in the long run.
Start by getting your dreams and goals clearly in sight. Go ahead and picture where you want to be in one, five, even 10 years. Got it? Good. Now, back to reality.
Getting Started
"The first five years are definitely the most difficult," Lake says. "Most design firms are simply scraping out a living, just getting by. But that's when they find creative ways to thrive, not just survive."
Lake's insights into managing a small but growing commercial design firm took years to take shape, and she says she is still learning. Even today, with a 10-person firm, she is always looking for ways to cut costs and boost profits. "Being creative about tackling costs becomes a way of life," Lake says.
But you don't have to go it alone. ASID is here to help -with knowledge gathered from other designers, suggestions on ways to make your operation more efficient, and a clear-headed look at where you are most likely to be losing your financial shirt.
Spend a Little, Save a Lot (Really)
One of the first things you'll notice about our "25 Ways to Save" is that some of them may involve spending money. Ironic, we know. But before you dismiss these ideas out of hand, remember, you are already spending money. In fact, your firm may be hemorrhaging it. And in cases where there is a core operational inefficiency or technological link missing, simply "cutting back" can miss the target or even exacerbate your problems.
Some of these solutions also ask you to spend time. Time and focus, actually. Because if you are used to doing things a certain way, sometimes it takes a real effort to examine your systems and see where they've broken down or become burdensome.
Remember, the point is not to rush out and buy all these new products or adopt all these new processes. The idea is to spend money on solutions that get to the root of the problem, stop the waste and let you quickly recapture your investment.
25 Ways to Save
Here is ASID's guide to reducing overhead across five key areas where design firms tend to leak the most money.
Facilities
- Consider sharing space with another designer or noncompeting firm. Or get adjoining spaces that allow you to share a conference room - maybe even a receptionist and support staff.
- Start out by working from home and renting meeting space only when you need it. Compensate for modest facilities by investing in a great Web site.
- Negotiate a barter arrangement with your landlord: You improve the space or offer reduced-rate design services for their other properties; in turn, they give you a break on rent.
Staff
- Be conservative about full-time hires. Most new employers significantly underestimate labor costs. When possible, use freelancers, part-time employees and interns instead.
- If you regularly hire temps, consider networking to find individuals (e.g., students, artists, new moms) who will freelance directly with you. By cutting temporary services and their markup, your temps make more, you pay less. You can also build relationships that increase in value over time.
- Hire consultants to help with large projects (particularly drafting, CAD tasks or specialty jobs). Wrestling with them yourself might not be a good use of your time.
- Outsource payroll, accounting and human resource functions, or share a part-time employee with another company.
Technology
- Upgrade or replace slower, older computers. Adding memory and replacing small monitors with larger displays can speed most tasks dramatically. And these improvements tend to pay for themselves quickly. The same goes for upgrading your Internet connection to a DSL line.
- Consider replacing slow, temperamental printers and thermal fax machines. Look into the benefits of fax-to-desktop software or the new, integrated printer/ scanner/plain-paper fax machines.
- Make sure you have the best software for the job. Wimpy, bargain software isn't a bargain when it creates incompatibilities, slowdowns and "Why-can't-I-do-this?" agonies. Check out some computing magazines or Web sites with software reviews before you buy.
- Upgrade inadequate phone systems with multiple lines, call-waiting and -forwarding, speaker phones, intercom, voicemail, and whatever else your firm needs to streamline and polish communications.
Productivity
- Get your employees training on the software they use most often (or should be using). Make sure everyone knows how to use e-mail and search the Web, how to use databases and how to format basic documents using time-saving templates. Software tutorials are built into many programs, and check out computer-based training resources on the Web, too.
- Once you are all Web-smart, have people research and order online instead of sending them out on errands or fact-finding missions.
- Be on the lookout for uncomfortable furniture, inadequate desk or work-surface space, noise distractions, and bad light. They all contribute to decreased productivity, high turnover and low morale.
- Don't overlook simple tools - like document holders, file cabinets, bookcases and bulletin boards - that help employees organize and stay focused on the tasks at hand.
Financials
- Open a line of credit with a bank so you don't have to take expensive cash advances on your credit cards. You'll avoid fees and higher interest rates.
- Shop around for lower rates on credit cards. But first, call your current companies, tell them you're getting lower-rate, pre-approved offers in the mail, and ask them for a rate reduction. Many times they'll say yes and even waive your annual fee.
- Bill clients promptly. Start charging clients back for requested overnight deliveries and color copies. Request retainers or deposits on large projects; get travel advances when possible.
- Check all incoming invoices and statements carefully. Hold staff accountable for reimbursables. Have them supply receipts for telephone calls, copies, samples, mileage, travel, client entertainment and other expenses.
Administration
- Trim shipping and postage costs by faxing, e-mailing or Web-posting whenever possible.
- Control long distance by using fax and phone lines after hours or on weekends when rates are lower. Use vendor Web sites and e-mail to check orders, stock and research new products. Look into a "one-rate" wireless plan that eliminates roaming and long distance.
- Bargain hunt for flights, book them well in advance when possible and enlist a travel agent's or Web search engine's help in finding inexpensive accommodations, car rentals, etc.
Marketing
- Cut display ads in general directories and periodicals. Instead, stick to specialized consumer and industry publications where you get more bang for your buck. Get major bang for no bucks by seeking "free media" and public relations opportunities. A single press release that nets you a story in the small-business section of your local paper can get your phone ringing off the hook.
- Don't forget ASID's four-color brochures. They offer an inexpensive alternative to creating your own. Personalize with your business card and present a professional piece for little cost.
- Remember that existing clients are your best advertisers. Give them extra business cards or brochures to pass on to their friends, and occasionally send notes, small gifts or e-mails with your Web address embedded. Work your relationships, and be sure to play up your successes. Clients love referring a hot new designer who just finished a great project.
Finding and buying supplies online can save you a bundle. Use the Web to order books, supplies, computers and more. Here are the sites to watch for everything from antiques to paper clips.
| Site | Reason to Go |
amazon.com | everything from books to palm computers, plus product reviews purchase and download popular software packages bid on antiques, art, oddities and collectibles leasing for high-speed DSL Internet connections comparison shop for computers and electronics prepare shipments and print airbills in an instant send files to be printed; design business stationery free e-mail you can access from anywhere art supplies, drafting tables, light tables office supplies and equipment galore - get free delivery or pick up your order at a local store digital scanning; large-format copies and copiers computer-based training for almost everything, including computer hardware and software compare a wide range of available airfares comprehensive source for business technology and information, free downloads, product reviews |
Tip: Don't overlook major manufacturers' sites, either. You generally can't order furniture or materials directly, but you can see entire lines and find local dealers. Many sites are also incredibly rich sources of industry and design information.
Getting the Lowdown
We asked a few ASID designers to tell us how they like to bring down overhead costs. Here's what we heard:
Favorite Overhead Chop Net Takeaway
| Bonding with Manufacturers' reps | Sheri Lake, ASID, president, MetroSpace, Arlington, Va."I love a good rep. Take care of them, and they'll take care of you. I order as much as possible from my favorite reps, and they find ways to save me money and cut me deals." When Lake renovated her office, she cut her remodeling costs by working with reps who had supplied materials for her clients. "We really spent less than half of what I had expected, because we got discounts on carpet, paint, laminate, lighting and more. I was amazed at what a high-end look we got, and they were happy to help." |
| Sharing space | "We bought our building by joining forces with another noncompeting firm." The other party is now becoming Lake's tenant, optioning off her interest in the property and leasing the space back. "It's the best of both worlds for both companies, and it has definitely improved our cash flow." |
| Outsourcing/Delegating | Jim Hanna, ASID, senior designer, Romanza Architectural Interiors, Winter Park, Fla. "Efficient outsourcing is not only a great way to keep operational costs low - it's a way to keep new projects coming in. The time recouped by delegating a project to a consultant or intern can often be better spent on bidding projects, marketing to new clients and keeping existing clients happy." |
| Technology | "Ten years ago, who would have thought this was even possible? With the Internet, we can find new products and sources, and even check orders online. We have interactive voicemail systems to save administrative labor, e-mail to save on phone bills, and we can now send plans electronically to save on couriers. There are so many ways to cut your costs now - it would be silly not to use the technology." |
| Leasing design center space | Fernando Diaz, ASID, president, Fernando Diaz & Associates, Los Angeles "Leasing a space within or adjacent to a design center can save you the hard costs of office overhead and furnishing a showroom." Diaz's offices are located in Los Angeles' Pacific Design Center. "The Center is my office and my showroom. It is a great solution for me. |
| Carefully reviewing expenses | "If you look at expenses every month, and report to someone else what you are spending, you tend to be more conscientious about everything. Even paper clips. I sit down with staff just to review our costs and see where the money is going." Diaz also meets regularly with accountants. "In one meeting, you can find errors or adjustments that can save you hundreds or thousands of dollars for the balance of the year." |
Skimps to Skip
Slash-and-burn budget cuts might seem like a good idea, but overly aggressive plans can backfire, burning employee morale, tarnishing client relationships and making you look like the bad guy.
Here are the perks to leave in place:
- Coffee, the water cooler and a few snacks in the breakroom
- Ample access to basic office supplies and computer equipment
- Adequate administrative support for high-level staff (you don't want them licking envelopes when they could be doing billable work)
- Occasional celebrations and rewards (including any performance incentives or bonuses you've already committed to)
- Client courtesies and communications (entertain clients less lavishly; instead send small gifts and cards, copy articles or clip pictures you think they'd like)
Payback
A productivity study by PC Computing's business laboratories suggests both training and technological upgrades pay for themselves (and begin returning profits!) more quickly than you might think. The study showed upgrades to processors, memory, monitors and Internet connections paid for themselves in days or weeks. The results for technical training were equally impressive.
The article, including a description of test methods and results, is available in the January 2000 issue of PC Computing ("Top 5 Technology Traps").
If you want to predict your own financial results, check out PC Computing's interactive "ROI Calculator," also available at its site.
R.E. Blake Evans is a senior editor with Hanley-Wood, LLC, in Washington. He writes on building and design industry topics.
