FEATURE:

BY CHUCK PAUSTIAN

Save money now!

Cutting excess costs from your budget will put your bottom line in a much healthier position.

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.

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 Web site (http://www.eere.energy.gov/consumerinfo) 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.

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.

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.

Use e-mail instead of snail mail.

Convert as many of your regular direct mail campaigns as possible to e-mail. Toni K. Napolitano, CIPS, CRS®, a salesperson with The Keyes Co., REALTORS®, in Fort Lauderdale, Fla., used to send out about 2,000 mailings each month but now sends e-mail to her contacts, which she sorts into such groups as clients, prospects, and sphere of influence for better targeting. “It basically costs me nothing,” she says. She still mails a property update report to about 900 recipients in her farm area and sends greeting cards during the holidays.

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.”

Look for alternative places to shop.

Did you know you can buy lockboxes on eBay? (Just make sure they’ve been deprogrammed.) Or that there’s a Web site—www.freecycle.org—that’s dedicated to helping people find homes for things they no longer want? Those are just a couple of places where you can obtain new and used items for little or no cost. Other Web sites include Craig’s List (www.craigslist.org), Overstock Outlet Shopping (www.overstock.com), and eCost (www.ecost.com). If you’re more of a traditionalist, check out the garage sales and flea markets in your area. You never know what treasures you might find.

Don’t duplicate.

Take advantage of products and services already available through your broker or office. Beth Kimber, sales associate with RE/MAX Allegiance in Washington, D.C., says she uses Web-based programs, such as contact management and forms software, that her broker makes available to all the salespeople in the office. She also recently discovered that her toll-free number has fax capabilities, eliminating the need for her to spend $8 per month for an eFax number. “Why pay twice?” she says. When you’re buying a new service or piece of equipment, such as a fax machine, see whether it’s feasible to share the cost with colleagues.

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.

Do your banking online.

Go to your bank’s Web site and take advantage of its free online bill-paying service. “You can manage it so that your bills are paid only one or two days before they’re due,” says Don Edwards, salesperson with American Dream Realty in Moscow, Idaho. “By keeping your average daily balances up, you can earn more interest.” In addition, some institutions will lower or waive monthly maintenance fees if you maintain a higher balance. Edwards suggests looking into setting up a savings account at an online-only institution, such as Affinity Financial Corp., a REALTOR Benefits(sm) Program Partner; ING Direct; or Emigrant Savings Bank. These online institutions don’t require minimum balances or monthly maintenance fees and pay higher interest rates than traditional banks on their savings accounts. Edwards says that you can take advantage of the free money transfer option to move money into other accounts as needed.

Take advantage of REALTOR Benefits(sm).

NATIONAL ASSOCIATION OF REALTORS® offers special benefits to members from more than 25 recognized companies. These special offers are tailored to your everyday business and personal needs. The discounts and services available through REALTOR Benefits(sm) will save you money and boost your productivity. By participating in the program, you also help generate revenue for NAR that keeps your annual membership dues low, so that’s more money in your pocket.

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