As businesses struggle to make a profit on Guam and around the region during these tough economic times it may be wise to analyze all your expenses to see where you can possibly save a little to increase your bottom line.  The reduction of specific fixed and variable expenses can improve your profit and help you survive. First a word of caution, do not needlessly cut costs as this can lead to your own self destruction!   Legitimate expenses provide the framework for your business and you don’t want to cut your operating budget too deeply and kill your business.   However, you must always keep on top of controlling expenses to maximize profits.  Each year, expenses have a way of creeping skywards.  It is up to you, to evaluate if those funds are being spent for their maximum effect.

First off, you can actually reduce costs without cutting specific expenses by increasing the average sale per customer.  If you can increase the overall value of a sale to each customer, you then spread the same expense across a larger income. This gives you better sales vs. expense ratio.  If you operate a retail store, you may measure sales per square foot.  Your goal may be to increase the sales per square foot by certain percentage.  Look to sales as a way to improve the success of your business.  Beyond offering quality products and services, it is the sale of those goods and services that keep you in business.

Also keep in mind that you need to build in a solid profit margin on sales.  A big sales volume with a thin profit margin is not the solution you are looking for.  A part of your product or service line may have a smaller profit margin simply because of competition and market environment.  If that is the case, then you must add a higher profit margin to other goods, so you can obtain an average profit margin, which meets your business goals.

Before you can accurately determine if cost cutting will increase profits, you will need to gather more information about your business operation.  Proper record keeping is the start and a key to success!  Your business records provide the financial data to prepare a budget, profit and loss statement, break-even calculations and operating ratios. This information can then be compared with similar types of businesses to evaluate if your business is operating within industry averages and help determine areas you need to analyze to cut costs and improve profits.  A break-even analysis will show you the volume point at which your gross profit equals expenses.  From that point on, you begin to move from a loss into a profit situation.  The break-even point is a very important piece of information to you as a business owner to know.

Once you have all your records in order you can then start analyzing where you can cut some expenses.  Your ultimate goal is to not pay more expenses then needed to maximize your profit.  Evaluate expenses and look at areas that may be high or rising at a rapid rate.  Look at how expenses are distributed from year to year and identify areas for review.  Review each segment of your operating budget.  Can you negotiate a better lease?  Can you renegotiate a long-term debt at a better rate?  Can you earn discounts by meeting accounts payable earlier in the payment cycle?  Can you cut specific costs for specific time frames in order to reduce overall expenses?  Can you get your receivables in quicker so you do not have to tap into your line of credit to cover costs?  Ask yourself these and other questions.

To learn more about controlling costs, increasing sells, improving profit margins and managing profitably, contact the UOG Guam Small Business Development Center (SBDC) at 735-2590 and ask to schedule an appointment with a Guam SBDC Counselor or to find out what upcoming business trainings are scheduled.

You need to capture every customer you can. That means you need to keep marketing, without it costing a fortune. Studies have shown that businesses that keep up their marketing even when the economy is in trouble emerge much healthier and with bigger market share when the economy improves.

Traditional Advertising —Print, Radio, TV - This is what most people think of when they hear the word “marketing”. But you don’t have to be on the main TV station or even in the leading newspaper. Instead, focus tightly on your target market, and consider less-expensive options such as:

• Local newsletters: Think of church, community, even condo associations
• Community newspapers: Especially free, give-away papers such as Super Shopper
• Local or regional special interest publications: Such as Guam Sports or Marine Drive Magazine
• Local public radio or TV stations: PBS Guam and KPRG Public Radio

Another hint: For any type of traditional advertising, ask for prices on “remnants”, left over space which is typically sold at deep discounts, and consider the audience for these shows (such as the midday K57 talk shows).

Person-to-Person Marketing - Small businesses know that one-to-one direct marketing drives most of their sales. But to really grow your business, you’ve got to work at getting people talking about you. One proven method is:

• Networking: Attend every holiday, party, business and community group meeting you can. Bring your business cards and a friend to support you. Don’t overplay your hand, but let people know that you have a business, that you would appreciate their patronage, and ask for referrals.

Another hint: Make sure you take good care of your existing, happy customers. Keep in touch with them, and if appropriate, reward them for their loyalty by offering discounts and perks. This will ensure that they remain happy customers, and ensure that they continue to provide an excellent source for referrals.

Online Marketing – Such as:

• Social networking: Start participating in online communities — facebook, myspace, linkedin – especially those appealing to your target market. This is really cheap — in fact, it’s free!
• Email newsletters: To keep in touch with your customers and advise them of new promotions (check out www.constantcontact.com);
• Leverage your website: Keep the design simple, limit the graphics, make sure it loads quickly (graphics add load time), and limit any advertising banners or outside links (that will distract your visitor’s attention). Then (1) offer free content (articles, tutorials, tips, reports); (2) give away something of value with your name, business, product or service attached (photo, ebook, or even a free course – if it proves to be popular, it will continue to circulate across the Internet); and (3) ask for your visitors’ name and email address (and create a database of potential customers).
• Blogs: Writing a blog can take a lot of time, but if you’re an expert in a field, it can provide visibility and drive traffic to you. But you can also become a regular contributor to discussions on a successful blog appealing to your target market —which takes a fraction of the time and still brings you attention.

Sampling, Signs, & Other Marketing – Sampling is one of the least expensive ways to get your product or service noticed. Yes, even services can be offered as a free trial, free quotation, free initial consultation or limited free sample. This is one of the least expensive —and most effective —marketing techniques. Also consider specialty promotional items – you know all those trinkets you get from companies (inc. pens, mugs, & calendars). They’re advertising that sticks around. And they’re typically a lot cheaper than even one radio or newspaper advertisement

Another hint: The holidays are a perfect time to give out samples or promotional items.

The Golden Rule of Marketing: Repetition – Regardless of which marketing tactics you choose, a key rule of marketing is that you must repeat your message to the same audience over and over again. It may be annoying to see the same TV commercial so many times, but it takes many exposures before someone even notices it. By the time you become aware of any ad — whether on TV, on the Internet, in print or on radio — you may have been exposed to it at least a half-dozen times.

Another hint: Even if you use networking as your main marketing technique, you’ll still need to attend the same organization’s meetings several times to make them remember you.