November 12, 2013

A Large Cup of Tea Cost Me $2.64

By Paul Bieber

I left the house early (for me) this morning and on my way to a meeting drove through Dunkin’ Donuts for a large cup of hot tea.  Normally I will make a cup and drink it at home, but I didn’t get up early enough today.  $2.64 for 20 ounces of hot water, a tea bag and some packets of Sweet’N Low™.  Probably cost Dunkin’ Donuts about fifteen cents for the raw materials.  But they do have a high overhead … the store, the drive-through personnel, advertising, insurance; well, you get the drift.  Overhead is the biggest uncontrolled cost in the company’s business.  I bet the same is true in yours.

Most glass shops will get three quotes when they buy glass or metal, and a couple of cents here or there can swing the deal from one fabricator to another.  This cost is controlled.  And most of you watch your labor costs.  It is the other, the miscellaneous costs, that are eating you alive.  Most owners spend more time trying to save three cents a square foot on an IG purchase than they do on their entire utility costs for the year.  After all, who can argue with the power of the phone company?

Well, you can.  Do you ever check your billing rates wtih your utility?  Just about every power provider will visit you to go over commercial rates, making sure you get the best programs they have.  Maybe you can shift power needs to later in the day, or let them install a remotely monitored meter to control costs during air-conditioning season.  One survey I read says that a majority of American businesses are overypaying their phone companies.  Many businesses have had phone lines pulled out or fax lines combined and are still paying for their original lines.  Do you still have the right number of cell phones listed on your bill?  (Hint … most companies are really overpaying here … call your vendor and ask what new packages they are offering to retain your account.)

Overhead includes paid for items that you don’t need … listings in Internet guides … donations to charities that are more involved with riasing money than doing good … memberships in organizations that you no longer attend.

Check your insurance … did your broken down truck come off your last invoice?  Are you paying health insurance for people no longer on your payroll? 

Are you buying office supplies from three different vendors when you could get lower prices by combining your orders, not to mention two-thirds less time in accounts payable?  Are you buying more coffee for the break-room than you could be possibly using?  This is the largest single dollar item that manages to find its way home with people.  (The second largest is toilet paper … yuck).  Are you providing single-use coffee cups for your company?  Have people bring in a mug from home and watch that bill disappear.

All this because I bought a cup of tea this morning.  Imagine how long this blog would have been if I had added a donut!