By Tom McKay

Originally published in The Crafts Report

Author's note: Time passes, tempus fugits, and things change. Some of the information contained herein, including prices, may be out of date. Caveat emptor and all that. 

Sure, you're self-employed. But isn’t it time you gave yourself a raise? Would you like to earn, let’s say, 20% more from your business this year?

There are two ways to do it: the hard way, and the easier way!

The hard way is to sell more. It's hard because it means more work. You'll have to buy more materials and supplies, work longer hours, then work at finding new ways to market the surplus. And that means even more work: find and book more craft shows, hire more reps and intensify your marketing efforts. All that extra time, effort and expense mean your financial outlay will certainly increase, but it's no guarantee your income will. A multitude of factors can sabotage sales, from foul weather at an outdoor show, to shady reps, to storm clouds brewing over Wall Street.

But there’s another way to sweeten your paycheck this year. It’s simple, guaranteed to succeed, and relatively little extra work is required. Ready? Just trim your expenses by 20%.

Think about it. Simply reduce your business spending by $1000, and that money goes right to your bottom line. Congratulations, you’ve just financed a delightful vacation! Shrink your annual outlay by $5000 and you’ve got a nice down payment for a new vehicle and braces for the kid.

No business owner can completely control sales and revenue. But you always have 100% control over your spending. If you don’t spend it, you can keep it, save it -- or spend it on something else.

That simple fact is not only comforting, it’s highly motivational! Here are two dozen ways to cuts the costs of operating your craft business.

Shop Around

Start by firmly deciding to reduce your spending, especially impulse items. Resolve that you will not buy anything significant (say, over $25 or $50) without thinking about it for three days. To help you remember, leave your checkbook and credit cards at home. You’ll be amazed how many "must have" items are quickly forgotten.

Comparison shop for everything. The Internet is a terrific tool for sniffing out the best price. Begin your bargain hunting with a visit to any of the major search engines. Ask Jeeves (www.aj.com) is a terrific place to find whatever you’re searching for, because it scrutinizes other search engines.

When you’re ready to buy, negotiate. This is especially true for "perishable" items like hotel rooms. You don’t have to be obnoxious. Just ask nicely, "Is that the very best price I can get?" That’s usually all it takes to land a 10% discount.

Book hotel rooms on the Internet, where you have access to amazing deals. Priceline.com and Travelocity.com among others, specialize in discounted "remainder" hotel and airline tickets, buying odd lots and reselling them. Savings routinely approach 15-40%.

Ask your suppliers and vendors for discounts. You’ll be amazed how many say yes. Craftspeople often assume they’re small, unimportant customers and don’t deserve really low prices. We thought so, too. Until one of our suppliers told us we were such good customers, we would now get their lowest "case" pricing on all purchases. Now we ask others to match or beat their low rate.

Staples, OfficeMax, Quill and other mail order giants can satisfy almost any office supply need by phone or online order. Staples even has free delivery if your order totals $50 and you’re within their delivery area.

Tele-bargains

Switch long-distance telephone carriers. Rates change regularly, and phone companies loathe to admit their prices have gone up. After MCI bumped our rate from 11 to 18 cents a minute, I switched to another major carrier who charges only 10 cents a minute. Within two weeks, MCI offered me $100 to come back. To insure you always have the lowest long-distance rates, consider switching every 3-6 months.

Does your business have a toll-free 800 number? Check your bill to see what you’re paying, then comparison-shop. At the time this was written, MCI WorldCom was offering business owners toll-free rates of only nine cents a minute, 24 hours a day, seven days a week. If you spend over $50 a month, your $5 monthly service charge is waived.

Shop around for a different local phone company, too. The Baby Bells have lost their monopolies in most states, and you are now free to choose your local carrier. Switching lowered my in-state long-distance rates from as high as 39 cents to a flat 10 cents a minute, in-state or out of state, 24 hours a day. It’s amazing what a little competition can do.

Money Handling Suggestions

Consider a credit card that offers free airline miles, a cashback bonus, or some other financial incentive. Then, to maximize your return, use it for all your purchases — business and personal. Be sure to ask them to waive the annual fee, if there is one.

Pay off all credit cards at the end of each month, if possible -- even if you have to dip into your savings. There’s no point in earning 4% on your savings while paying 19% or 22% interest on your credit cards. Credit card interest rates have soared so high, they’d make a loan shark blush.

Don’t hurry to pay invoices. Take the maximum allowable (interest-free) time to pay your debt. If it’s due in 30 days, don’t pay it in seven. On the other hand…

Take advantage of discounts. I routinely offer my writing clients a 2% cash discount if they pay within ten days. If you get such an offer, take advantage of it and pocket the profit.

Insurance

Review your business insurance. Do your coverage and deductibles still make sense? A 20-minute meeting with our agent saved us almost 50% on our annual premium. Raise your deductibles and save even more. Or shop around for a different company. In spite of what your agent would like you to think, insurance is a commodity. For the very best deal, call an insurance broker (rather than an agent) who can choose from numerous companies to find the one with the best coverage at the lowest cost.

Deduct your health insurance premiums and out-of-pocket medical expenses, like doctor’s visits and medication. How? By hiring your spouse to work in your business. Contact BizPlan at 1-800-626-2846 for details. For an annual enrollment fee of less than $200, the average family will save $1800 in taxes by deducting health insurance premiums – just like big corporations do.

 Change the Way You Do Business

Raise your prices. Your costs are almost certainly rising. When was the last time you hiked prices? Notify your wholesale accounts six months in advance. That makes it easier for them to digest the news. It might even prompt them to reorder now, at the lower price.

Change your shipping habits. Shipments under a pound are usually cheaper via the Post Office. Packages over a pound cost less via UPS. Be sure you’re using the most economical approach.

Plan ahead to avoid overnight or second day delivery. That’s MUCH more expensive. If you must ship overnight check the various carriers as well as the post office for the best rates.

Set up a web site. Urge customers online for information, photos of your artwork, and to order. It’s a fraction of the cost of printed brochures and postage, and can be updated more quickly and frequently. The cost of hiring a professional designer to create a site for your business will still end up saving you money in the long run.

If you don’t have a web site, use e-mail or fax whenever possible when customers request literature. Photos of your work can be scanned and sent as attachments to an e-mail message for a fraction of the cost of a duplicate print.

Banks and Financial Institutions

Examine your monthly bank statement for surprise charges and fees. While banks have gotten increasingly competitive, they also charge for products and services which used to be free. Shop around for the best deal.

Consider joining a credit union if you’re eligible. Credit unions operate like banks and offer the same services, but they are owned by their members/depositors. Thus they frequently have fewer fees and offer lower interest rates for loans.

Save by purchasing checks from a printing service instead of your bank or credit union. For example, Designer Checks (1-800-239-9222) or Checks Unlimited by Current (1-800-533-3973) charge as little as half the bank price.

Start an SEP-IRA (Simplified Employee Pension) or Keogh plan to shelter pre-tax dollars. Be sure to diversify your investments in a family of good "no-load" (meaning no sales commission) mutual funds, like Vanguard or T. Rowe Price. Set up an automatic monthly withdrawal from your checking account to keep your retirement savings on schedule. Fund it with some of the money you’re saving by being a more careful shopper!

Finally, two words of caution

Hire a pro when you need one. You need one for your will, and another for your taxes. Two years of tax returns I prepared on my PC later had to be redone because I mistakenly overfunded our SEP. The tax and penalties we paid later were much more than an accountant would have charged to prepare the returns originally, and would probably have avoided the mix-up in the first place. Business tax returns are complicated – hire a professional. But shop around. Our present accountant charges half what his high-priced predecessor billed, and he’s much more in tune with our business. He’s also a much nicer guy.

Finally, don’t become a scrooge, so consumed by penny-pinching that you forget to live joyfully. Today is a gift -- that’s why it’s called the present. Just remember you don’t need to spend a fortune to enjoy the really memorable and valuable things.