This past year I cut expenses at Toy House by 7.8%. And I did it without sacrificing customer service or the reach and frequency of my advertising.

Here’s what I did:

PAYROLL – Yes, I cut payroll. Had to. It is the single largest expense we have. Yet, even with all my cuts, my payroll actually became a larger percentage of expenses than before. And customer service did not diminish.

The two things I did were:

• Schedule Smarter – By more closely tracking sales I was able to better schedule the staff to make sure I covered the busiest days and times without over scheduling the slow times. I also spent more time matching team members to make sure I had the most efficient crews working when staff was at lower levels. Put your peak staff on at peak times to get peak results for your money.
• Divert My Own Salary – As the president of the corporation, I pay myself a salary. This year I took a pay cut, offset by a dividend on the company stock I own. This shifted my payroll expense from the Profit/Loss statement to the Business Equity. If your business has a lot of equity, this can be a great way to shore up the P/L for the short term. Talk to your accountant to see if this is right for you.

Net result – 4.8% cut in payroll and related expenses

ADVERTISING – Another big expense that I cut drastically (on paper) was advertising. In actuality, I made some smart changes. Specifically:

• Cut Yellow Pages – They aren’t worth the money. People don’t use them anywhere near how they used to use them. Even the online Yellow Pages don’t garner much business. I get far more traffic to my website from my vendors’ Store Locator pages than I ever did from yellow pages online.
• Shifted Radio Stations – I switched one of my stations to a cheaper station with a similar number of listeners. Same reach, greater frequency, fewer dollars.
• Invested Time into Social Media – Time equals money. I put time and effort into building relationships through Facebook. Doesn’t cost as much money, but does take some effort.

Net result – 20.4% reduction in advertising expenses without changing the reach and frequency (and I am already spending some of those Yellow Page dollars elsewhere for a bigger reach and frequency this year:-)

Other simple cuts included:

• UTILITIES – Made a 1 degree change in the thermostat that kept heating costs down. Customers didn’t notice, and the staff changed wardrobe accordingly. Saved 0.8%
• INSURANCE – My insurance rep negotiated a better Worker’s Comp policy saving us 2.1%
• TRAVEL – Made all the same trips as last year. Just stayed one less day at the trade shows. Saved 18.1%
• SELLING SUPPLIES– Searched for new supplier of bags and giftwrap to lower expenses. Saved 2.9%
• FREIGHT – Less sales meant less inventory meant less orders meant less freight expenses. Saved 10.2% (Consider this a benefit of a down economy:-)

Yes, those last few were smaller dollars, but every little bit adds up.

There are many ways to cut expenses without cutting services. You just have to be creative. Look for places where you can spend time instead of money. Follow the three R’s – Reduce, Reuse, Recycle. Measure, measure, measure. You can’t manage what you don’t measure.

That’s what made the difference for us. What will make the difference for you this year?

-Phil