Cut Overhead Costs, Keep the Quality: 12 Simple Ways

by Erica Starr 20. October 2016

Cut Overhead Costs, Keep the Quality: 12 Simple WaysWhenever you seek input on how to better your business – whether you’re looking to increase profits, improve cash flow, or make yourself attractive to lenders – you’ll get this bit of advice:                         

Cut your overhead.

A business that controls its overhead costs is one that’s well positioned to weather lean times while boosting its margins all the time. But cutting deeply into service costs or product development threatens to undermine the very things that make your business unique.

So here are 12 ideas that any business can pursue to reduce its operating costs without sacrificing quality. 

Low Hanging Fruit

Most businesses budget are chock full of waste and fat, and it’s incumbent upon owners to look at every line-item carefully. Consider these areas:

  • Rent: Are you using all the office space you’re paying for? There are 168 hours a week; how many hours are people actually occupying your space? If your answer is 40, you’re paying to lease space that’s being used less than a quarter of the time. Consider reducing yours by reducing your footprint. Options include downsizing to a smaller space within your current facility; subleasing unused space; renegotiating your lease; or moving. Think you need all the space you have? Consider how many of your employees are perfectly capable of working from home, at least part of the time, and would love the opportunity. Consider, also, how much space each of your employees is taking. Do you have a lot of private offices for employees who don’t really need them? If you work in a “cube farm,” how big is each cubicle – and how big does it really need to be?
  • Energy: Energy can be a big expense. Using less space is a great way to reduce that monthly bill. And with deregulation of utilities, it’s easier than ever to find ways to cut your energy costs even further. Shop around for the most cost-efficient provider. Consider energy-efficiency systems that can help you save money. State agencies and most utilities offer incentives, rebates, and other assistance to help you implement these systems.
  • Travel: Inexpensive meeting software like GoToMeeting is making it easier to have face time with clients, employees, and partners without the need to fly or drive. When you travel less, not only do you cut your travel budget, you also spend less time in transit and more time actually working.
  • "Miscellaneous": Whether it’s supplies, office parties, or something else, every company (and every department within every larger company), spends a certain amount of its budget on things that no one is really managing. Pay attention to every penny.
  • Anything that's not driving ROI: Eliminate everything that’s not producing a return on your investment: that Yellow Pages ad, for example, or a subscription service you’re not using. Dump anything that’s redundant, too. For example, it’s not uncommon for different departments or individuals to be using competing versions of the same business software simultaneously. Get everyone on the same system.

Involve Your Team

Your employees are full of ideas on how to cut overhead you’d never come up with on your own. They’re closest to the action and, therefore, the most likely to see waste and redundancies first. Of course, getting workers involved can be tough — or even backfire if it’s seen as an effort to cut staff.

Here, then, are several strategies to help you encourage a culture of employee engagement. 

  • Be credible: When you ask employees for advice, approach them with facts, not false reassurances or corporate jargon. If you need to cut overhead to make your business healthier, say so. Present them with some high-level numbers. Your employees will appreciate your honesty — and reward you for it.
  • Go beyond the survey: For businesses with more than 20 or so employees, surveys can be an effective method of gathering opinions – and simple online tools make them cheap and easy. But they’re also sometimes unwelcome. They’re a chore to fill out. Employees are often skeptical that anyone’s paying attention, but if they aren’t certain they survey is anonymous, they won’t be candid. So feel free to use surveys to gather input, but at the same time look for other platforms to solicit feedback. Private social-media groups, intranet boards, and instant messaging tools may encourage employees to share their thoughts organically, and engage in conversation.
  • Show your appreciation: Reward employees who make helpful suggestions in ways both large and small. Meaningful bonuses tied to meeting specific cost-cutting objectives; contests awarding prizes to the employee who has the best overhead-reduction idea; and even small thank-you gestures are appreciated by your team. More importantly, they’re effective in encouraging positive engagement. And make these awards in ways both expected (end-of-year banquet, employee of the month) and not (surprise gift cards and random thank-you emails).

Examine Your Payroll

Salary freezes, shorter hours, pay cuts, and targeted layoffs should never be taken off the table, especially in lean times. In fact, you need to always be examining your payroll, which is likely your largest expense.

No doubt, you’re proud of being able to provide meaningful employment for your workers while also making money for yourself. So if you do have to trim staff, you’ll want to do so thoughtfully and smartly.

  • Current employees: Start with a detailed evaluation of who’s performing essential functions and who’s not. Look for redundancies among your current team’s responsibilities, and evaluate each person’s capacity for professional growth. It may be that two employees are performing a job that could be consolidated into a single position. Instead of just keeping the more senior person, ask which employee might be adaptable to additional responsibilities. An employee who has been doing one job for 10 years may be great at that job — but it’s fair to ask why he or she hasn’t been promoted into new opportunities. In the long run, you need employees who can grow with you, and even help accelerate your growth.
  • Outsourcing: Many business owners try to keep as much in-house as possible, thinking it’s cheaper. Often, it’s not. You can cut payroll by outsourcing functions that are not core to your business, while also accessing experts in those functions — be it information technology, marketing, human resources, or something else — to do what they do best instead of forcing you to wear every hat.
  • Freelancers and independent contractors: A close cousin to outsourcing is the use of independent parties to perform services on a freelance basis. It’s tempting to reserve the use of freelancers to one-off projects, but independent contractors now perform all kinds of jobs. Indeed, before adding a new permanent position to your payroll, you should always consider whether the job could be performed just as well on a contract or freelance basis.
  • Automation: Thanks to technology, the most routine functions of just about any job can now be automated. Using business “softbots” — e.g., QuickBooks — to automate accounting, taxation, invoicing, and payroll can immediately help you reduce headcount. There’s also software that can help you cut overhead by automating, for starters, marketing, ad buying, and logistics (routing, fuel expenditures, vehicle maintenance logs, etc.).

Talk to Your Advisors

Outsourcing or automation? Engaging employees or eliminating perks? Using the cheapest vendor or the one with the best reputation? These are tough questions. Don’t try do it on your own. Your mentors, peers, lender, and banker are all valuable advisors. Use them.

For help in getting these questions answered, reach out.


How to Pay for It: Home Equity Line of Credit vs Other Options

by Kathy Passman 12. October 2016

How to Pay for It: Home Equity Line of Credit vs Other OptionsWe’ve all heard the stories about people, before the 2008-’09 financial crisis, using their homes as “ATMs.” I’m talking about homeowners using the equity in their homes to pay for luxuries – jewelry, vacations, even cosmetic surgery.                          

We were talking recently about his relationship with his bank. And when I asked him what questions he asks whenever he’s vetting a new bank, his answer intrigued me.

That’s poor financial management, and a lot of those folks got themselves in real trouble.

Today, most homeowners seem to have learned that lesson. I rarely hear about abuse of home equity lines of credits (HELOCs) or home equity loans anymore. Instead, when homeowners do take out a HELOC, too many of them use it solely as an emergency fund.  
But this approach many not be the wisest choice for your money, either. There is, in fact, a middle ground between abusing the credit your home equity affords you and using it wisely.

What Is a HELOC?

A HELOC is different from a home equity loan, in which you get a lump sum amount, then pay it back according to a schedule. A HELOC makes a percentage of your home’s value available for five to 10 years, and its interest rate adjusts with the market (meaning they’re usually very low). When it expires, you only pay for what you’ve used – then it disappears with no additional expenses.

But, like a home equity loan, any interest you pay on a HELOC is treated like mortgage interest, which means it’s tax-deductible. Remember to consult your tax advisor when it comes to tax-deductibility.

Any loan or line of credit carries some risk, and a HELOC, for which you use your home as collateral, is no different. But if you are savvy and conservative, a HELOC is a safe and secure way to pay for a number of life’s major expenses. Let’s take a look at a few of them…                               

College Tuition

Because the interest rates are usually lower than those on student loans, using a HELOC to pay parts of your child’s college tuition could be a good option. Compare interest rates and closing costs to see if a student loan or a HELOC is cheaper for you.

Home Improvements

HELOCs were designed to be used for home repairs and renovations. And that’s still the primary reason homeowners take them out. However, we recommend you use a HELOC primarily on improvements that increase a home’s value. That way, any interest you pay will return to you when you sell your home.

A HELOC is also good for financing essential repairs that may not raise the value of your home but will upgrade its safety and/or structural integrity. In this case, I’m talking about fixing a leaking roof or replacing faulty wiring. 

For other home improvements, such as interior design and landscaping, tap your cash savings (though not your emergency fund). Or, put it on your credit card and pay it off at the end of the month. That way you can insure the equipment you buy — and pick up some points. 

Emergency Fund

Everyone should keep an emergency fund to cover unexpected health bills, car repairs, and home repairs. Where you keep that emergency fund depends on your situation and financial philosophy. Some people believe that any money that isn’t “working for them” is useless. They keep their emergency fund in an easily accessible interest-paying savings account.

However, the interest rates on savings accounts are pretty measly these days. And so, you might be better off piling most of your cash into a stock market index fund. It’s not very sexy, but it earns more than a savings account. Then, use your HELOC as your emergency fund.

Consolidating Debt

Besides what you pay off at the end of every month, do you have any credit card debt? If so, get rid of it. Use your cash to pay off what you can, and then pay down as much as you can of the rest using a HELOC. Home equity lines of credit charge much less interest than credit cards, so you’ll be saving money. Plus, unpaid credit cards hurt your credit score and, therefore, your chances of getting loans in the future.

If you consolidate debt using a HELOC, you’ll get out of debt faster thanks to those lower interest rates. Plus, you’ll essentially be paying yourself rather than Visa or MasterCard.

If you’re ready to apply for a HELOC, or to talk more about the best ways to use a HELOC you already have, please contact us.

1st Mariner Bank’s Summer of Service

by Erica Starr 21. September 2016

As Baltimore’s favorite community bank, 1st Mariner takes great pride in serving the needs of our friends and neighbors, whether that’s inside our branches or out in the community.

This summer, we’ve enjoyed several opportunities to get out and about and give back. While we’re sad to see summer go, we’re looking back fondly on great memories of a summer of service. 

Angel Park

In July, the 1st Mariner team participated in the Community Build program at Angel Park, a very special facility being built in Perry Hall, Md.

The all-inclusive playground and amphitheater will serve as a new center of the community, offering a memorial garden for calm reflection, fun and unique play equipment for children of all abilities, and a place for local artists to share their talents—all in memory of Ryan Szczybor, the baby boy who lost his battle with leukemia at just 15 months old. His parents Kelli and Andy are the masterminds behind Angel Park, and they have brought the entire Perry Hall-area community, businesses, families and individual volunteers together to make their vision a reality.

1st Mariner was honored to help build sandboxes and other playground equipment and we look forward to bringing our families back to enjoy Angel Park when construction is complete.

Ellicott City

After historic floods devastated Ellicott City on July 30, 1st Mariner was eager to help businesses and neighbors rebuild. To help support flood victims in their efforts to rebuild, we partnered with Kelsey’s Restaurant and Irish Pub in Ellicott City to organize a fundraiser, complete with a silent auction. Ten percent of all sales at Kelsey’s from the entire day of August 9 went to the Ellicott City Partnership, along with 100% of proceeds from the silent auction, which featured Joe Flacco-autographed merchandise. All together, we were able to raise nearly $5000 to support the Ellicott City community as they rebuild.

FOP’s Night at the Yard

At the Maryland Fraternal Order of Police Conference this August, 1st Mariner was honored to have the opportunity to host a happy hour event at Oriole Park at Camden Yards. We’re grateful to our police officers and their families for all the sacrifices they make to keep us and our loved ones safe each and every day. We felt it was important to show this gratitude and enjoyed the chance to get to know and say thank you to many officers in person, and together, cheer on our Baltimore Orioles!

It’s been a great summer, and while these were just a few highlights of our Summer of Service, we’re thankful to have had these wonderful opportunities to serve our neighbors and communities. We’re looking forward to lots more this fall, so stay tuned! We hope you’ll join us in giving back.

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