Thursday, July 31, 1997

Expanding on a minimal budget

By PAUL TULENKO/ Scripps Howard

You'd really like to expand your business, but the market pretty well dictates the final price and you just can't cut your costs any closer and still stay in business. So how do you expand on a minimal budget?

The answer, as one television personality used to say, is to "Make a Deal!" Here's how:

n Form a cooperative: Gather a few business friends together and see what you buy in common and how much each of you buy per month. Get an agreement that if you can cut costs, your friends will buy these products through your cooperative. Shop the suppliers of these products and talk about buying in bulk, providing a suitable discount is given.

The supplier likes this arrangement as it provides a steady source of business from a new customer and leaves the door open for doing other business as well. Be careful and not overbuy! There's nothing worse than having a garage full of merchandise no one wants. Make your commitments in advance each month and purchase that amount only. Obviously, this will take some time on your part each buying period to contact everyone, but the savings may be worth the effort.

-- Barter your services: There are two ways to barter: as an individual with one other firm or as a member of a barter organization. Bartering as an individual can be as simple as trading your services or products for services or products of equal value from another firm. For example, you could trade desktop publishing services to your professional organization in exchange for monthly dues.

If you do this, trade dollars for dollars. Don't cut and don't overprice your services. Both of you need to benefit for the system to work. And equal services means no money need change hands.

There are barter organizations out there that permit you to barter your products or services to anyone in their organization. You receive "barter bucks" instead of cash, and you can spend your bucks on goods and services from anyone else in the group. The barter organization usually takes a small bite out of the exchange and may charge dues.

The benefit of joining a barter organization is you don't have to spend "real" money; it's strictly an exchange system. You exchange your goods and services for "barter bucks," then exchange those bucks for goods and services you want. A note of caution: the IRS will declare the sale as a "real" money sale for tax reasons, so be sure you keep track of the "expense" side of the transaction to offset the bite.

-- Establish affiliations: Some businesses will sell at discounts of up to 50 percent if they know you are "in the business." This is what is sometimes called "buying wholesale." You know electricians get a break on switches and wire from suppliers and you can't. It's the same for practically every business, so ask! If you let the supplier know you are in an affiliated business - and some may ask for proof - you can usually arrange for a substantial discount on your purchases. If you're new in the business, you may have to pay cash until you build a credit history, so after you've negotiated the best deal, ask if you can take a discount for cash payments.

-- Use your contracts: If you happen to be in a business where you can influence purchases of others, you may be able to receive a "bird-dog" fee from the supplier based on the purchases of your customer. This is not illegal and is done all the time under the name of a finder's fee, sales commission, referrals and similar titles.

-- Make a deal: Offer to buy exclusively from a supplier for one year if they give you a rock-bottom discount. If you make this kind of a deal, stick to your end like spaghetti on a new shirt. Even if one or two items are priced higher than a competitor, the overall discount will probably cover that anomaly.

-- Use the competition: If you really want the item or service and it is a little higher than you can purchase at that shop across town, tell the merchant about the difference and ask if you can have it at the price of the competitor. You'll probably succeed.

-- Pay cash: If your supplier offers credit-card privileges, they pay anywhere from 1 to 7 percent, based on the type of credit cards they accept. Ask if you can take a discount if you pay cash.