Save Money Now!

Cutting Excess Costs Will Put Your Bottom Line in a Healthier Position
By Chuck Paustian

AZR November 2009


     


Arizona REALTOR® Archives
2003 - 2010

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There’s a basic rule in business: To improve your results, you have to increase revenue or decrease expenses or both. Large corporations often have teams of people on the lookout for ways to save money. Small-business people—a category that includes most real estate practitioners—have to work cost cutting in among other duties that demand their time and attention, such as sales, marketing, customer service and administration. That doesn’t mean you shouldn’t take the time to look for savings. As Benjamin Franklin famously said, “A penny saved is a penny earned.”

To get you started down the right road, here are a variety of ways to reduce business expenses without sacrificing quality. Some of the tips offer the potential for significant savings right away. Others will save you money over time. Clients and customers won’t notice a difference in your service, but before long, you’ll see a change in your bottom line.

Overheard on Facebook

AAR Asked, “What Have You Done to Positively Affect Your Bottom Line?” Got rid of the costs that didn't produce results. Had a business plan! Social media’d it! – Joeann Fossland (Advantage Solutions Group, Tucson)

Start with a plan, have a good tracking system and eliminate low ROI expenses. If you haven't done this yet, you will be surprised at how much is there. Oh yeah, and do more of what works. – Evan Fuchs (Bullhead Laughlin Realty, Bullhead City)

I have done more networking. Also have been watching costs on needless advertising. Know the areas of town better to cut down on gas cost. Kept up-to-date on new laws, rules and regulations. – Bonnie Cissell (Selman & Associates, Lake Havasu City)

Love and adoring all my past clients in my database and out-of-state real estate agents. They keep the referrals coming. – Karen Kay (Realty Executives, Tempe)

I have taken designation classes such as CNE (certified negotiation skills), SSPA (certified short sale agent), REOS (real estate owned specialist). Now bring it on, I'm ready! – Lisa Kraft (US Preferred Realty, Mesa)

Become a fan of AAR on Facebook: www.facebook.com/realtorsuccess.

Incorporate. Jim Hurley, broker-owner of RE/MAX Midwest Group in St. Louis, says many practitioners are unaware of the potential benefits of incorporating their businesses. Even if you know the right questions, you might be talking to the wrong person. “An accountant who prepares tax returns for individuals might not be as familiar with the potential advantages for corporations as one who specializes in corporate accounting,” he says. Depending on the type of corporate entity formed, some of the potential tax advantages could include the deductibility of health and life insurance premiums, as well as certain travel and entertainment expenses. Tax benefits are often subject to specific requirements, so be sure to consult a corporate accountant or other tax expert to determine whether incorporation is the right approach for your specific situation.

Conduct an energy-efficiency evaluation. As your parents used to say, “We’re not paying to heat (or cool) the outside.” Go through your office—or home if that’s where you work—to identify ways to improve your energy efficiency. Make sure all your windows and doors are properly sealed, check the filters on heating and air-conditioning units to make sure they’re clean and functioning properly, and install energy-saving lightbulbs and a programmable thermostat. The U.S. Department of Energy maintains a website (www.energysavers.gov) that’s loaded with energy-saving tips and information. Also, check with your local utility company to see what types of programs and advice it offers.

Hire your spouse. Under IRS regulations, sole proprietors can’t give themselves tax-free employee benefits, but they can give family benefits, such as health insurance, to all employees. So if you hired your spouse to do legitimate work for a fair wage, you could legally provide family health insurance, which would also cover you. Why would you want to do that? You’d receive a larger tax deduction than if you took the insurance expenses (health insurance premiums and most uninsured costs) as a personal deduction, says Michael Verbick, owner of TaxSaver in Kenosha, Wis., a tax adviser to sole proprietors. “This process has been around for more than 50 years,” says Verbick, noting the IRS issued a position paper on the subject in 1999. He says savings can range from $2,000 to $7,000 annually, depending on total health expenses incurred and the individual’s tax bracket. Read more on the deduction at www.taxsaver105.com, or go to www.irs.gov, then check with your tax preparer to determine whether this strategy would work for you.

Recycle.This goes beyond saving aluminum cans and old newspapers. Try to get multiple uses out of items before you discard them. For example, print documents for internal use on the backs of old documents. (Just be sure not to use paper that contains confidential client information.) Use old stationery or business cards for internal notes or phone messages. And refill your printer’s ink cartridges instead of buying new ones.

Decide what you no longer need. Regularly evaluate effectiveness of the business products and services you buy. Are they delivering the benefits promised? If a lead-generation service isn’t providing enough quality leads to justify the cost, stop using it. Not getting any business from the ad you placed in a local publication? Don’t renew it. Be careful to allow vendors sufficient time to deliver results, but don’t throw good money after bad.

Think twice before buying. To avoid impulse buys, analyze each purchase to determine not only whether it’ll help you in your business but also whether you’ll actually use it. Mary Zentz, CRS®, e-PRO®, a salesperson with RE/MAX Suburban in Arlington Heights, Ill., sets professional and personal goals; if a purchase doesn’t help her reach one of those goals, she won’t make it. She also checks in with colleagues to get their input on a potential purchase, “I belong to several real estate mentoring groups, and before I buy something, I discuss it with them to find out whether it’s worthwhile.”

Keep vendors in line. Review all your service providers and vendors regularly, then compare their prices with those of their competitors. Use this opportunity to discuss ways to lower your costs. Sometimes just the threat of moving your business will cause a service provider to offer you a better deal, especially if you’ve been a good customer. Plus, you might identify ways to get a better deal by consolidating services with one vendor. If the cleaning service you use for your office also does homes, see whether the company will give you a break on pricing if you agree to use it to clean all your listings.

Buy in bulk. If you have unused storage space, you can buy office supplies and other business goods in large quantities, such as those available in warehouse clubs, and often cash in on lower per unit prices. (Check out the warehouse clubs and other mass retailers for individual items such as desks, chairs, and filing cabinets at competitive prices, too.) You can also take advantage of sales to stock up on items that can be stored for extended periods of time. Many Internet retailers offer discounted—even free—shipping on orders that meet minimum purchase requirements. If you don’t have the need or storage facilities for large quantities, team up with some colleagues to see whether you can consolidate orders.

Reprinted from http://www.realtor.org/realtormag REALTOR® Magazine with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2005. All rights reserved.

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