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ACCOUNTING

A Can't-Miss Plan for Cutting Costs

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See if you can relate to Mike Scimeca's story: After founding Florida CirTech in Sarasota, Fla., in 1991, he experienced five straight years of consistent revenue growth. But then the pace slowed. And instead of the 80%-a-year increases he'd come to expect, sales grew 30%. For Florida CirTech, an $8-million supplier of chemicals and metals for the circuit-board industry, the result was stalled profits. Scimeca had overestimated how much the company could spend.

To regain the 25% margins he was accustomed to, he made cutting $200,000 a yearly goal. His methods have paid off handsomely.

One of his strategies is asking suppliers for helpful advice. Unhappy with how much the company paid to ship its products across the country from its new headquarters, in Greeley, Colo., Scimeca quizzed his suppliers about their strategies for cost-effective trucking. He reasoned that they'd know about managing freight prices, since they trucked tons of materials to Florida CirTech each month. Scimeca learned that his freight could travel at a cheaper weight classification than he'd been using, and he reduced freight costs -- a $700,000 annual expense -- by 15%.

Scimeca also comparison-shops among suppliers, scouring the Internet and buyer's guides for savings. Sometimes the comparisons lead to cost-cutting epiphanies. Florida CirTech used to pay $9,000 monthly on recycled containers for chemicals, buying 600 at $15 each. Another supplier offered to sell his containers for $13. Scimeca inspected the supplier's facility for quality. His conclusion? "I saw that we could recycle containers ourselves in-house," he says. "It was just a matter of buying some equipment."

Florida CirTech bought $10,000 worth of equipment and began the project. Scimeca now pays $1.25 per container, mostly in labor costs. "We made back the $10,000 in two months," he says.

Since Florida CirTech's customers take an average of 60 days to pay their bills, Scimeca's cuts have improved cash flow more quickly than increased sales would have done. The cash has allowed the 25-employee company to continue adding cost-saving equipment and make a recent acquisition, all without paying interest to the bank. That's something Scimeca takes pride in. "Our company is almost completely internally financed," he says. "You've always got to be thinking about where you can save."

Last updated: May 1, 2000




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