Gary Shapiro is always busy. Spend any time with him and you’ll hear him say, “Sorry, I gotta get this.” Several times.
There are two reasons for that: Mr. Shapiro answers every call from every single customer, and business is going very well.
Mr. Shapiro is the founder and president of Auto Vault Canada, which stores cars and tires in a secret, high-security location near Toronto. And like most entrepreneurs, he’s working hard to keep his costs down and maximize every dollar he puts into the business.
“I do my research looking for the best deal,” he said. “We’re constantly bombarded with pitches and offers. We listen, but it takes a lot of time.”
In fact, shopping around for deals isn’t always the most efficient way to get the highest return on your investment, says Colin Sprake, founder and chief executive officer of Vancouver-based Make Your Mark Training and Consulting Inc. and author of Entrepreneur Success Recipe.
“Of course, it’s great to get a deal,” he said. “But not if it costs you more time and energy than you save.” He suggests a number of other ways to get better returns.
Staff are the biggest expense for most entrepreneurs, Mr. Sprake says. Many businesses hire fast and fire slowly, when the opposite is better. He employs a third-party human resources firm to handle his hiring. It presents him with three qualified candidates out of the hundreds who reply to his advertisements.
“Many entrepreneurs learn the hard way, by hiring the wrong person, only to have to get rid of them later on,” he said. “The cost of having a new hire leave after as little as three months can end up costing about the same as a year’s salary, and it can send a very bad message to your clients if they see high employee turnover in your company.”
Making sure that employees are properly trained is another worthwhile investment many entrepreneurs miss, even though it is likely to save money in the long run by making employees more effective and more likely to stay.
Mr. Sprake points to one client, a doctor’s office serving patients who require orthotics. “Orthotics generally wear out in a year or so, so they’d get one of their receptionists to call to remind them that it might be time to get a new set about a month before the year was over.”
Mr. Sprake replaced that with an automated system that sends patients a monthly e-mail that keeps them up to date on their orthotics and other information that could help them. “We ended up giving the patients more than they were getting before,” he said. “And saving the doctors a hell of a lot of money.”
The biggest mistake most entrepreneurs make is with handling money, Mr. Sprake says. “Most of the time entrepreneurs borrow money or get lines of credit. It’s because they need it right now – it’s desperation borrowing, and it costs a lot,” he said.
To keep financing costs down, he recommends making a cash flow projection. With an honest and accurate projection, he says, an entrepreneur can approach the lender with a higher level of credibility and negotiate a better lending rate.
And there are even easier things you can do. “It absolutely amazes me that entrepreneurs don’t talk to their banks,” Mr. Sprake said. “One time, I called my bank manager, told her that I needed a break on interest and they reduced the rate on my credit card from 18 to seven [points] for a year. It was as simple as that.”
He also recommends finding the appropriate credit card for your business. If you have several employees, look for a card that offers supplemental cards for a low cost. And make sure you get the most appropriate rewards program.
“Obviously, if your business requires travel, a travel rewards bonus makes sense,” Mr. Sprake said. “But even if it doesn’t, a getaway for two can make a very impressive loyalty reward for your top client, and nobody needs to know you got it through points.”