Grow Your Business November 2008

Dear Business Leaders,

Welcome to the November edition of the Xenex Group Newsletter. 

You have been sent this as a client or associate of Xenex Group. We regularly provided an interesting mix of articles on management, leadership and business process, for senior executives and business owners to better manage their people and resources.  We hope you find these articles sufficiently stimulating for you to make a commitment to positive change within your business.

Best regards, 

Daniel O'Connor.
Consultant Principal.

Rarely do we include a reprint of a current or past article in our newsletters. The following article is deemed so relevant and important in this era of economic change, that we have elected to lead our November news with this. I have obtained permission from the author, a prominent research economist and principal of the research group IbisWorld. Phillip Ruthven is the founder and Non-executive Chairman of IBISWorld, in addition to being one of Australia's best-known social and economic forecasters and public speakers. He founded IBIS in 1971 from one of Australia's largest food corporations and his family company and is the sole owner today.

Phil's reputation in Australia's Business Community as a strategic thinker is second to none. Requested by many major organizations to be a guest speaker for a variety of events, Phil now travels Australia and the world sharing his insights into business growth potential and future directions. Phil contributes articles to many publications and TV shows in Australia, including the Australian Financial Review, BRW and guest appearances on Four Corners. Phil is a science graduate from the University of NSW. He added to these qualifications with further studies in management and economics at The NSW Institute of Technology and UNE respectively. Phil spent over ten years in the food industry, including executive positions in research, production and marketing, before establishing IBIS. I hope you enjoy this article.........

As we near the end of the first decade of this new Century, Australia has relatively few financial and economic issues of the sort that are tearing the USA apart. This century promises to be Asia’s century, after North America’s 20th Century and Europe’s 19th Century. And Australia is part of Asia’s economy and society. We have three weaknesses in 2008: a chronic lack of savings that led yet again to massive off-shore borrowings in F2007 (over $52 billion), overpriced housing (by around 30+ %), and some over-leveraged property trusts. These weaknesses, however, are not enough to panic about. So talk of a recession let alone a depression is premature, if not almost ridiculous in the case of a depression. Only four in a hundred Australians have experienced the nation’s last depression from 1929-1933 and they would have been very young then, aged between five and 15 years old. Those older have largely passed on. For older Australians aged 40 or more at the onset of that depression, it was yet another terrible trauma. They would have already experienced a worse depression lasting nine years from 1890-1899 and with a deeper fall in the economy— a 23% fall in GDP compared with 20% in the 1930s. So why the 1930s depression was called The Great Depression is odd; after all, it was the least hurtful of all the depressions preceding that one. Nevertheless that generation then experienced the horrific World War I from1914-18. So to face two terrible depressions and a world war that saw the death of over 61,000 soldiers—and many times that in injuries and disease—was to have pain etched in the psyche of over a million citizens. We return to the consequences of this pain in terms of life’s attitudes, priorities and lifestyles shortly. Most of this older generation, incidentally, went on to experience a second world war between 1939-45 that took the lives of almost 40,000 more people. These days, as the saying goes, we don’t know we are alive. These four traumas were experienced by many other nations, of course, and this helps explain why there was so much resolve by the post-World War II generation of adults to ensure we never had depressions or world wars again. And we haven’t. Could we again? Possible but unlikely is the short answer in 2008, as we come to the close of one of the most tumultuous years for our economy, in living memory. There is, after all, a much better understanding of both recessions and depressions these days; and more importantly, there are mechanisms available to prevent, or at least ameliorate, recessions and even depressions. Our nation has had some 26 recessions and four depressions (encompassing 22 years) over its 220 year history since European Settlement in 1788, but only five recession years and no depression over the past seven decades. So the mechanisms, and some serendipity, are working for us. It is important to understand the profound difference between recessions and depressions, and their respective causes. Causes of Recessions

Recessions are short periods of falling economic output involving at least two successive quarters of decline, but rarely extending beyond 15-18 months.
Most of them were caused by poor agricultural seasons before Word War II. Given that this primary industry accounted for between 15-50% of Australia’s GDP up to that time, it took only a 25% fall in farm output from droughts and/or floods to cut our overall GDP by 4% or more that year and trigger a recession.

Nowadays, with Agriculture being only 3% of the nation’s economy, a 20-25% fall in its output can only take less than 1% off our GDP and in no way lead to a recession.

So in the post-World War II years, recessions are caused by human failings not Acts Of God. It is now falling investment (capital expenditure) by up to 10% that triggers recessions. Given that each year new investment is around 25% of the economy, a 10% fall is enough to cause a recession by leading to a fall of, say, 2.5% in GDP. Governments seeing this coming can step in and bolster capital expenditure to stop an impending recession in its tracks. They did this in 1966-67 and 2001-02, meaning recessions were avoided.

The most recent parrying of a recession was by the Howard/Costello Government in 2001. They stepped in with a $7000 first home buyer’s grant—doubling that to $14,000 a year later—and boosted capital expenditure on housing to such an extent that the overall fall in investment was minimised and a recession avoided.

Interestingly, both Australia and the USA have long business cycles of around eight and a half years, and we are recession-prone via potential collapses in investment only at the end of each cycle. The end of the current cycle is due around September 2009, so our Federal Government has a year to plan a boost of up to $20 billion in capital expenditure in the event that the private sector cuts its investment too much. It has heaps of money to do this as a result of years of surplus Budgets by the Howard/Costello years, and continuing surpluses with the Rudd/Swann team.

What may not be known by most Australians is that consumption expenditure—mainly by households but supported by government spending on education, health and other consumer services—has never been negative in five decades, as the chart shows.

It isn’t consumers that cause recessions; rather it is nervous boards of directors in the business world who savagely cut their capital expenditure plans. They are also not helped by difficulties in getting the money from spooked or under-capitalised banks, scared stockmarkets and other fearful lenders.

However, the avoidance of a recession for Australia in 2009-10 should not be that difficult. The Treasury in Canberra and our Reserve Bank are both skilled to act swiftly, and yet again avoid a recession. The Rudd Government has now acted quickly to bolster both capital and consumption expenditure in the middle of October this year so, another potential recession would not be due until 2018 at the earliest. Here’s hoping, but we can do so somewhat confidently.

Causes of Depressions

Depressions are altogether different from recessions.

They involve at least two years of declining output and most have lasted for four years or more. We have had four of them: 1788-89 (Captain Arthur Philip’s colony), 1840-1846, 1890-1899 and 1929-33.

Their causes, apart from the First Colony setback, are greed and short-sightedness. The effect is a massive and sustained fall in GDP, unemployment rising to truly distressing levels with widespread hardship, and frightening collapses in asset prices—both property and financial assets. The falls in our GDPranged from minus 20-31% over these four depressions. Unemployment levels rose to between 17.5-20% of the labour-force.

We certainly do not want to experience another one. And like recessions, they can be stopped in their tracks by appropriate actions by Treasuries and Reserve Banks; although even with such actions a nation usually experiences at least a recession and lingering pain in the society for several years. This is the price of the greed and madness of crowds, including crazy asset prices, which led to the problem in the first place. After all, the causes of depressions are far more serious than the causes of recessions.

Interestingly, the 1990-1991 recession in Australia may one day be seen to have been a technical depression given that its biggest impact was crashing asset values (housing, other property, shares and our equivalent of America’s “junk bonds”), rather than crashing economic output, which fell by less than 2% of GDP. The greed of the so-called entrepreneurs in the Eighties was palpable. Our government agencies did act decisively on the “recession we had to have” as Treasurer Paul Keating said at the time. But as said, we may one day regard this as a controlled depression.

This time, in the troubled late Noughties, we do have some inflated asset prices. In September 2007 our stockmarket was overvalued, by about 15%, but punished by an over-reactive 42% fall by mid October 2008. It will recover within a year or so, and is probably already a source of many bargains for the patient investor. Yes, some of our investment banks and property trusts are paying the price of excessive exuberance, but as a percentage of the nation’s financial assets, this accounts for less than 1% of the $4.7 trillion of such assets; so it is easily manageable.

Housing prices have been very inflated, by as much as 40%, as shown in the chart. This is worrying as the nation has $3.6 trillion in housing at present. The average dwelling for over 50 years after World War II had been around 2.6 times average household gross incomes, but rose rapidly in the new Century to four and a quarter times.

However, this was not due to excessive greed, but the shortage of housing. Today we are building the same amount of new homes that we did in 1975 and this is despite record immigration levels of around 180,000 per annum. Simply, State governments have not done adequate planning, released enough land or made it easier for developers and builders to create new housing estates and dwellings.

So greed of the sort that has been the base cause of previous depressions is not evident in 2008. Yet overpriced housing will face some adjustment over the next 5-10 years.

That said, households (the main source of savings) have been poor savers in Australia for decades, despite the introduction of the superannuation levy in 1993, which is now 9% of our wages, as the chart shows.

The USA Scene: A Depression or Recession?

The US has a far more serious set of problems than Australia. It is grappling with the cost of two expensive incursions in Iraq and Afghanistan, and with inadequate taxation of its citizens to do so. Indeed, its overall taxation is around 25% of its GDP compared with our 31%. It should be at our level.

Its capital expenditure—the source of growth and productivity in any economy—is a lowly 17% of its economy compared with our 27%, which means its infrastructure is decaying.

Its finance industry is in disarray, the result of sloppy if not criminal practices associated with mortgage lending (low-doc and especially sub-prime lending) and reckless investment bank lending and leveraging.

Lehmann Brothers has gone to its grave, Merryl Lynch was snapped up by Bank of America, the Federal Reserve saved IAG by taking an 80% equity share, and saved both Fannie Mae and Freddie Mac (the dominant mortgage institutions of the USA). No one suggests this carnage is yet over.

The 2008 meltdown in the USA has so far seen asset losses of over $US 300 billion by failed institutions, and Treasury allocation of bad-debt absorption funding of $US 700 billion.

Assuming a Treasury exposure by end 2008 of say, $US 1 trillion, this would represent only 1.2% of the assets of all financial institutions in the USA ($84 trillion). This is a small price to avoid a potential depression, and would still be if the ante rose to $2 trillion. So getting carried away with big numbers is irresponsible and fear-mongering. A depression, if not a recession, is certainly avoidable in the USA. They have worked hard for a recession, however, and may well experience one sometime over the next 18 months. Their recovery into a once-again vibrant economy could take some time.

But the ripples, indeed financial Richter Scale tremors, have made their way from the USA around the developed world. A scarcity of capital for credit and capital expenditure purposes is a problem for Australia going into 2009, hence the necessity for the government to make up a shortfall in private sector capital expenditure—which they can do comfortably, and are doing.

How People React and Societies Change

Recessions do not have too many lasting impacts on society at large, although a small minority of households and individuals are affected, including some getting financially “wiped out” as they say. They are usually much more conservative in their attitude for many years, if not the rest of their life, as a result.

But depressions change the whole society, creating conservatism, a degree of regression in thinking and the evolution of furphies and some muddled thinking. They also lead to extraordinary energy, ambition and economic and productivity growth.

As Australia came out of the 1930s depression and World War II, our economic growth was breathtaking for more than two decades as people made up for lost opportunities from 1929 to 1945; more so than during our exit from the 1890s depression.

At the same time households developed some financial conservatism. It was not uncommon in the post-war years for parents to have empty cans and jars along a mantelpiece in which to divvy up a man’s pay-packet into moneys for rent, gas, telephone, school fees, and beer money, etc. The penchant for home ownership was such that the saying “rent is money down the drain” was born and lingers to the present day, even though for decades interest payments and other costs of home ownership have been twice the amount of rent for an equivalent home!

Hire purchase, introduced in Australia in the late 1920s was eschewed by The Depression generation, and only really adopted by the Baby Boomers in the late 1960s, who were not prepared to wait forever to have quality furniture, TV sets and cars like their patient parents.

Time also created some misconceptions about the good and the bad of the 1930s depression. As a young adult I once asked my grandfather, who was brave enough to start a small chemical company with two partners in The Depression, if other types of businesses also did well. He thought about it for a while and said yes. Bread (as a necessary staple), lollies (to cheer up the kids) and beer (to cheer up the breadwinner) were all good businesses he thought. Many years later, as an analyst, I found they were all terribly tough businesses! Families had begun to make their own bread during The Depression, as it was cheaper. They made toffees with sugar and treacle in the oven, being cheaper than bought lollies. And beer? Well port was a cheaper source of alcohol, and “fourpenny darks” were a better proposition than beer to drown one’s sorrows.

The effluxion of time has muted the fears that older generations had. When only 4% of the population has any experience of a depression, it is no wonder.

Some 75 years later we are a less fearful society. We have advanced the means of preventing or ameliorating such potential catastrophes.

We may not be economically and financially bullet-proof here in Australia, but we are possibly the best placed in the OECD. All of our banks are triple A rated, our government has virtually no debt and has money in the bank, and we have the serendipity of a mining prices boom. Our businesses have conservative and manageable debt/equity ratios, and less than 5% of our households are debt-servicing stressed (mortgages, more than credit card or personal loan debts).

It doesn’t get much safer than that.

(reprinted with permission Author P Ruthven, IbisWorld - Nov 2009)

With the economic changes and their effects on State economies, there has been some unannounced posturing in several State Government migration departments. We have seen several rejections of minimum-commitment proposals from Queensland which have been invited to re-submit with higher criteria. As a result, we have adjusted the minimum commitment for Queensland sponsorship to $500,000 investment and a minimum of 2 additional employees. In proposals that include exports, there is more scope for leniency on these criteria. As proposal-writers, we are always mindful of the need for applicants to meet their promises at a later time, so we always keep all commitments low.

NSW applicants (as well as applicants selecting South Australia) must have visited the State and conducted some of their own research and the Victorian Government does still not recognise that purchasing a franchise is adding any skills to that State's economy. For most States, evidence of research is required ( we have extensive research resources to access for most business preferences). Xenex has maintained our policy of only processing Subclass 132s for Western Australia, to ensure approval as a Subclass 132. This service provides a no-obligation pre-approval submission, which is a requirement of the Western Australian Government.

There has been no policy announcements in the past few months, but as these are published, we will bring them to your attention through this newsletter. for more details on the requirements of each State, please ring  or write to Daniel on 08-9335 7724 or daniel@xenex.com.au

Small business owners are starting to feel the effects of the credit drought. Many may already have experienced disappointment with a loan application. Meanwhile unexpected needs for a cash injection keep coming up such as a delivery vehicle breakdown or an opportunity to pick up some normally expensive office equipment or machinery at a good price. With credit getting tighter and credit card charges going up, who can a cash strapped owner turn to for a loan?

Increasingly these days, the answer is – to a stranger. A peer-to-peer (P2P) loan (also known as ‘person to person lending’ and ‘social lending’) is a loan mediated directly with another person without using a bank or financial institution. Would-be lenders compete with each other on the basis of the interest rate they apply. The lender willing to provide the lowest interest rate ‘wins’ the borrower's loan. The majority of these deals bring together a borrower and lender not previously known to each other. For a flat fee, P2P lenders may also perform a ‘family and friend’ transaction helping a borrower and lender who  do already know each other (family members or business associates) to sort out the terms of a loan arrangement and then formalise it in writing.

The process has become popular because it is mediated by the social networking capabilities of the internet. Popular P2P lender organisations, such as iGrin, LendingHub, Prosper, Zopa and Virgin Money, have become the eBay equivalent of the personal loan market putting borrowers in direct contact with lenders for loans up to around $25,000.

The allure of peer-to-peer lending goes beyond finding a willing lender charging a reasonable rate of interest. The process is not known as ‘social lending’ without reason. One unique aspect of P2P lending is that it gives borrowers the chance to tell their story, so applying for a loan can be as much about winning hearts and minds through mentioning shared hobbies or interests as about a compelling business plan. At LendingClub, lenders pick borrowers based not only on their credit profile, but also on their affiliations; at Prosper, users can create groups that, based on members' repayment history, receive star ratings and can help member borrowers get lower rates.

It may be easy money but is it smart money?

The fact that money may be just a few clicks away makes P2P borrowing a very tempting proposition.  But that doesn't automatically make it a smart choice. The P2P option can be used intelligently to deal with a short term cash requirement or to trade a high rate credit card debt for a lower rate P2P loan – their lower interest loans can be used to pay off a high interest credit card balance. However, as with all financial deals, you need to understand the rules of the road if you don’t want to crash.

Generally, the basic principle of lending - that the lower your credit score, the lower your chance of getting financed - applies just as much in P2P deals as it does with traditional lending institutions. P2P lender sites usually grade borrowers' credit worthiness in some way, based mainly on their credit score.

Money borrowed through a P2P lender is reported to the credit bureaus as a personal loan. Paying off $10,000 in credit card debt still leaves your credit report showing a $10,000 debt – only now it will represent your personal loan. You haven't gained any ground in reducing your overall debt but you have lowered the interest rate you pay on the debt. That may be a good result in itself, but it doesn’t improve your credit score in any way. Loans taken out to fund business activity can even reduce your credit rating. Regardless of the purpose the borrower has in mind to use the money for, it really amounts to, and is treated by credit companies as, just another personal loan. By adding this new loan to your debt, your credit score may go down. That can affect your longer term ability to get a loan from the conventional sources or even credit from vendors or suppliers.

The new P2P lending sites, as with credit cards before them, may be making it a little too easy for a business owner to get their hands on money. P2P lending obviously addresses a gap in the credit market, but such loans can hurt personal credit scores and potentially draw business owners in over their heads.  Before seeking money from a P2P site a prudent business owner should sit down and take a really hard look at their financials and do a cash flow projection to make sure they can pay back the loan. Otherwise they could be making a bad situation even worse.

Every business has its share of high maintenance customers, but not every business subscribes to the ‘customer is always right’ philosophy and feels they have to go on supporting them no matter what. In fact, some businesses will actually ‘fire’ a customer they no longer want to work with and often report being happier and financially better off once having done it.

In some instances firing a customer is a no-brainer. Those that don’t pay their bills or break the terms and conditions of sale are probably going to be more of a headache the more you deal with them. So let’s assume you have decided there is no recourse but to fire one of your customers. Is there any way to do it tactfully and without creating lasting resentment on their part?

Firing tactics

Price them out of your market: Cost conscious customers who constantly complain about price and expect service way beyond what they are paying for are likely to move on if they face a price increase from you. You can justify it by telling them that you are getting busy and have raised your rates to be more competitive and in line with your value. Give them the new price structure based on restoring the balance between the costs of serving them and the value they contribute to your business and leave it up to them to make the decision whether to stay or go.

Pass them on: Contact the customer personally and politely explain why you think you may not be the best supplier for them in future. There are a number of business related reasons you can come up with that aren’t accusing or confrontational – you are cutting back on doing that sort of work; your plate is full and you can’t take on any more work; you intend serving a different market and they don’t now match your customer profile, whatever. Thank them for their past business. Conclude by offering them a list of alternative suppliers you feel would be a more appropriate match for their needs.

Stop rewarding them: Some customers are chronic complainers. Often their game is to rip you off by playing on your commitment to customer satisfaction. They’ll return a product they damaged knowing you replace ‘no questions asked’; or complain about something because you offer a discount on a subsequent purchase to make up for slips by your employees. When it becomes obvious a customer is just playing the system it’s time to answer their next complaint with a simple, “Thank you! I am sorry that we did not meet your standards.” No discount voucher or any other incentive to come back to you.

Don’t let your action backfire

Get paid what’s owing: A fired customer may just take the attitude that if it’s alright for you to fire them then it’s alright for them to not pay what they owe you. Take what steps you can to recover unpaid invoices before firing them. Don't threaten them with what you will do if they don’t pay up within the specified time, just assume they're going to pay and wait on events.

Complete all contract obligations: Firing a customer without having met all your contractual obligations leaves you open to legal action for breach of contract. Before giving notice, review all your written contracts to ensure you have met your end of the bargain.

Retain supporting documentation: Any record of the customer’s dealings that would support your decision to fire them, such as letters or emails in which they have threatened you, maligned your character or made a promise to pay that was subsequently broken and so on, will be valuable support if the customer does decide to take legal action. 

After the break, avoid fallout

Even when it’s well handled with tact, courtesy, and professionalism a customer who realises they have been fired is likely to feel a little resentful. The best you can hope for is that they don’t complain too publicly about what happened to them. Meanwhile, you may feel like crowing over the fact that you are finally free of this albatross. Don’t! The wider you broadcast the news the more potential for damaging fallout. It could harm your professional reputation to be seen to be gloating. It could damage business – other customers you had no intention of firing may hear of it and wonder if they are next. They might take pre-emptive action and leave before being fired. Just be quietly glad that the customer from hell is no longer your customer!

Customer loyalty programmes work big time for big companies but SME owners are often deterred from developing one because of worries about how much it would cost or how difficult it would be to organise and manage. As a matter of fact, the very same principles that keep customers coming back to big companies can be utilised to develop an SME scale loyalty programme without a lot of cost and drama.

Make customers feel like ‘members’

Creating a ‘club’ that provides special incentives to members is one of the best ways to retain customers. This approach works because it is based on the primal human need to ‘belong’ to something – especially where belonging also makes us feel we are being treated as special.

Who gets to be a member? A customer loyalty programme based on membership should convey a feeling of privilege for those selected so it can’t be open to all and sundry. Customers may qualify for membership either by purchasing their entrée or by dint of their past support and loyalty.

General Nutrition Centers, a specialty retailer of vitamins and supplements, offers a Gold Card membership programme that provides discounts on products, personalised mailings and email on health related topics, product news and exclusive offers. GNC found that they could even use their programme to actively iron out lows in their sales pattern by offering a special discount on sales made on Tuesday, traditionally their slowest sales day.

Only your imagination limits the opportunities for coming up with a bundle of services around your basic product offering that some segment of your customers would find appealing – a dry cleaning business could offer a discount on cleaning, free alterations and a pickup and delivery service; a book shop could offer discounts on items purchased, a magazine of latest releases and reviews, invitations to catered book launches and author talks.

Reward customers for purchasing from you

Reward based programmes are among the most common of loyalty schemes – think frequent flyer points and coffee cards. They provide gifts and perks that are earned according to the amount of business a customer does with you. Providing a free reward after multiple purchases is an effective enticement to keep them coming back.

Usually, all that is required to manage the programme is a card on which each purchase is registered. After a certain number of purchases, or after making purchases that add up to a certain value have been made, the customer receives their reward – after 6 cups of coffee, one free; after 10 CDs, a free CD; after 9 car washes, the 10th for free.

The reward doesn’t have to be related to what you sell. A clothing store could reward customers who purchase above a certain dollar value of their lines with a couple of movie tickets; customers who have earned enough points can go to an online store and choose from a variety of products there.   

Let customers feel good about themselves

Many customers love the idea that while purchasing something for themselves they are also doing something for someone else. Letting customers know that part of what they spend in your store helps out a good cause, whether you choose to sponsor an internationally recognised charity or the local kids’ football team, will appeal to some segment of your customers. They’ll be drawn back through their sense of charity or community spirit to make their contribution to the good work.

A customer loyalty programme reduces customer defection and may even attract new customers once word gets around about the benefits it provides. Keep the scheme simple. It shouldn’t be too hard for customers to understand how it works or to earn their reward. Put the real thinking into just what sort of reward would be encouraging to your customers - knowing what is most important to them is the secret to making a customer loyalty programme successful. Small businesses are actually in a great position to implement loyalty programmes because they can find out fairly easily what interests, motivates or inspires their customers.

Caught in the crunch between tightening credit and increasing energy, transport and material costs, an SME owner’s mind turns to … cost cutting! Great idea, but where? Use lower quality materials to cut down inventory cost? Maybe leave out that final inspection before packaging up? Cancel the ad in the Yellow Pages? Fire a couple of employees? Pruning the big ticket items will save on costs right enough, and quickly, but at what long term consequences to the quality, reputation and awareness of your product.

There may be any number of costs lurking in your everyday activities and procedures that just don’t get noticed simply because they aren’t big ticket items. But that doesn’t mean they can’t add up to a significant spend nonetheless. Look around and see if these tips can help drive down costs before making any drastic decisions that may come back to haunt you later.

Fuel

• Organise your errands so you can take care of several on the one trip
• Arrange delivery schedules, sales calls or installations according to the shortest route between them rather than zigzagging across neighbourhoods
• If delivery is a courtesy rather than an integral part of your sales process, then consider cutting it out, offering it to only your best customers, scheduling it in late morning or early afternoon when traffic is lightest, or introducing a fee for it

Utilities

• Turn off equipment that’s not in use - computers, photocopiers, lights, air conditioning
• Switch to energy efficient light bulbs
• Use high efficiency rated appliances
• Install automatic light switches and put the aircon on a time switch
• Make use of natural lighting where possible

Office supplies

• Put a moratorium on buying all but essential supplies
• Reduce printing to essential documents and use the reverse side of paper for copying draughts and internal documents
• Use recycled paper
• Buy from office warehouse companies or discount stores
• Purchase locally – shipping costs from distant distributors can more than double costs

Office equipment

• Before buying new furniture check out second hand office supply dealers

Communications

• Cut back on unnecessary phone service add-on features  like music on hold
• Price compare phone service providers
• Consider a VoIP solution
• Take away mobile phones from employees who don’t rely on them to do their job
• Price compare website hosting service providers
• Consider next afternoon or two- or three-day service instead of express shipments
• Use email instead of postage mail whenever possible

Make cost cutting a continuous improvement programme

While you may have been pushed into a cost cutting exercise by the current economic situation it’s smart to make cost review a normal and regular part of running the business.  Now that you have carried out this review, ensure the process of actively searching for cost cutting opportunities stays alive and keeps contributing to increasing your profitability.

The three great essentials to achieve anything worthwhile are, first, hard work; second, stick-to-itiveness; third, common sense - Thomas Edison

Be sure to read each article with the mindset "How could this apply to our business." Thinking of it that way will guarantee that you get value. Better yet, take notes as you read and commit to having the ideas implemented by the time the next edition arrives. Also, make copies for each team member. To really make sure something positive happens, work with your Xenex business development specialist to talk your team through the ideas and how to set a schedule for getting them implemented. We're here to help you get started.

While every effort has been made to provide valuable, useful information in this publication, Xenex Group and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.