Jewelers spend 20% to 25% more than necessary in their operations, say business experts. That’s foolish in good times, but in tough economic times, it could make things even tougher. Here are practical tips from jewelers and business and retail experts on how to tighten the business belt without choking the business.

Identifying costs. Before cutting costs, know what they are. “Make a list of typical expenditures,” suggests jewelry retail management expert Kate Petersen of Performance Concepts Inc. “Determine if each is a cost or an investment. Does it provide a return—an investment—or is it a straight cost?

“For investments, look at what you spend on something vs. its returns, both tangible and non-tangible,” she says. For example, customer courtesies—such as fine candy given as gifts or in bowls on the sales counters—can cost a jeweler hundreds, even thousands of dollars a year. But do they contribute to your store’s ambience and customers’ comfort level, making them more likely to visit and buy? If you eliminate them, will customers notice, and how will that affect your business?

“With straight costs, such as cleaning or office supplies, estimate your actual usage [amounts, hours, per-piece] and how much you spend,” says Petersen. “See what else is available, compare per-unit costs, and see if there is a better price.”

Priorities. Ask yourself, “Which costs can I control, and which can’t I control?” says C. Steven Hegg, senior vice president of Business Resource Services. “Those that vary with sales are fairly controllable. Those that don’t change, whether you have record sales or no sales, are fixed costs.

“Go through two past years of income statements, line item by line item, and see which costs rise faster than sales. That’s the start of really understanding your costs.”

Next, he says, “Set short-term projections for two to six months. Determine short-term cash needs. Review your plans with your banker. Keep [payment of] your vendors current and take cash discounts where possible and set the profit margins you want. Review expenditures at least monthly.”

Plan ahead. Comparison shopping plus careful preplanning helps avoid needless spending. Many jewelers let supplies go to the last minute—i.e., when stationery is down to the last three sheets—before reordering, then must pay for “rush” shipping, which increases the cost.

“Small business owners have many responsibilities,” notes syndicated business columnist Jane Applegate. “They often don’t have time to look for best prices and so buy at the last minute. But they must put a priority on this. They must force themselves to comparison shop, get competing bids for supplies, and expand their network of suppliers.”

Advice. Meet with friends in the business or similar-sized retailers, says Hegg, and ask what they do to save money or cut costs. Talk with fellow members of the local Rotary and Kiwanis Clubs. “And get your staff’s ideas on cost-cutting,” he says. “Ask them: ‘Where are we wasting money that I don’t see?’ “

Using staff. “Ask jewelers what their ‘largest controllable expense’ is, and many will say, ‘Payroll,’ ” says Petersen. “Unfortunately, that’s often where they cut. Doing so, though, can mess up a business, because payroll is an investment, not a straight cost.”

“Your most important asset is your people,” says Hegg. “They make money for you, not cost money. Get rid of your most important asset to save money, and it signals them that even if they do well, it makes no difference.

“Instead of cutting people, support them and enhance their delivery across the sales counter,” he urges. “Be sure they’re well-trained, and use them efficiently, so you have enough working when you need them, not too many or too few.”

Other jewelers agree. “You keep good employees with flexible schedules, fair pay, and benefits, and they work harder,” advises Eileen Eichhorn of Eichhorn’s Jewelers, Decatur, Ind. At Hupp Jewelers, Fishers, Ind., “We teach our staff various jobs so no one is ever without something to do, especially on ‘slow’ days,” says Lynn Hupp.

If a jeweler relies on part-time and temporary help to save payroll costs, “Do job sharing,” says Petersen. “Schedule them to do the work and fill the [equivalent] hours of a full-time person, with someone there all the time.”

If a jeweler must cut staff, adds Applegate, “Invest your money in your most productive people. Terminate those not giving their work full attention.”

Shipping. “An ungodly amount is spent by independent jewelers on shipping and freight in and out,” Petersen notes. “For example, a customer asks to see a 3-ct. diamond. The jeweler doesn’t have it and places an order for rush overnight delivery, usually at a cost of $25 in and $25 out. The customer returns days later, if at all, rejects the stone—and the jeweler places another rush order, at added cost.”

The alternative? “Get specific details on what customers want, and make appointments for them to see the stones,” says Petersen. “If time isn’t an issue, use regular delivery.” Add the cost of special orders to the price, says Hegg, and get a deposit ahead of time.

For shipping in general, consider professional shipping services that offer “fabulous” bulk rates, says Petersen. The jeweler ships as much as he wants and is billed at month’s end. Rates are better than on a per-shipment basis, and shipping services usually cover all insurance.

The U.S. Postal Service (USPS), adds Applegate, also offers all the services (including overnight delivery) of other shippers, plus small-business programs. Laura Stanley of Stanley Jewelers, North Little Rock, Ark., agrees. “We save a fortune sending low- to medium-priced merchandise and repairs in a USPS $3 priority envelope,” she says. “They arrive in two days, at a lower cost.”

Co-op. Co-op advertising also can lower jewelers’ costs while providing creative ads they couldn’t afford themselves. Yet, according to some estimates, up to 60% of U.S. jewelers don’t know co-op is available or fail to claim co-op dollars.”See which of your suppliers offer co-op,” urges Susan Light of Lights Jewelers & Gemologists, Hattiesburg, Miss. “For those who don’t, find someone who does, with a comparable product at a comparable price.”

Light is an avid user of co-op dollars. “I can do $1,000 of print ads, apply 50% of that as a credit to my next bill [with her supplier]. I get the same amount of advertising, but at $500 less.”

She keeps co-op records in an old three-ring binder, divided into sections alphabetically by supplier. Documents include a customized form, plus tear sheets or other supplier-required proof, which go to suppliers. Light uses these records

to itemize invoice numbers (from the advertising bills) and dates when ads ran. “This organized tracking system is easy to maintain, simplifies paperwork for the supplier, and expedites our receipt of credit or checks,” she says.

Ad tips. “Review every dollar you spend for marketing and advertising, not just co-op,” says Applegate. “Track public response to spend your money more effectively. Put a code in each ad or flyer, to see what works [in traffic and sales]. Ask customers, ‘How or where did you hear about us, this sale, or this item you are buying?’ “

Buy ad space after deadlines. Smaller newspapers, radio and TV stations, and organizers of major events often offer unsold space or time at a discount, notes Applegate.

“A jeweler should tell his advertising reps he is interested in bargain-basement, last-minute ad rates,” says Light. “The ad rep then has someone to fall back on when space isn’t sold. For example, our university football team does multi-page guides. The Thursday before a Saturday game, they usually come to me with an unsold half-page at half the cost.”

Don’t accept mistakes in your ads. “It’s surprising how many people do,” notes Light. “I won’t. I refuse to compromise on my advertising’s quality. Ad reps know I won’t accept their mistakes. I make sure I get a rebate, a credit, or an exchange.”

Energy. Schedule an “Energy Use Audit” of your business by your local utility, suggests Applegate. “It’s free, and the utility will tell you how to use energy in your business more efficiently and less expensively.”

Use energy-saving light bulbs, available at most home-supply stores. “Though a bit more expensive than normal ones, they last seven times longer,” notes Light. “We use them in our store’s ceiling, wall sconces, and lamps and save several hundreds of dollars a year.”

To conserve energy, turn off lights, computers, and air conditioners when leaving the office or store at the end of the day. Use automatic set-back switches on thermostats for air conditioning and heating. These are preset to turn off when the store closes and turn on when it opens.

Insurance. Annually review and update your business insurance with your agent, says Hegg. “Look at what’s covered and not covered and where new savings are possible. Your agent also can advise you on avoiding costly accidents (e.g., hazards in the stock room, uneven sidewalks outside).” Be sure you have all the discounts for which you qualify, advises Applegate.

An independent agent can get the cheapest coverage with the best company or solicit bids from two or three insurers, adds Hegg.

Paper. Print on both sides of paper for internal documents, says Applegate, and recycle your business’s paper. At Hupp Jewelers in Fishers, Ind., for example, “we cut the plain backs of letters into squares for messages,” says Lynn Hupp. “We reuse large brown envelopes for cash receipts and register tapes. We use simple plain white envelopes when paying bills and for employees’ paychecks.”

Goodman Jewelers in Madison, Wis., recycles paper printed on one side, including some junk mail, for its fax machine. At Light’s Jewelers, “We recycle our boxes and papers,” says Susan Light. “If there is a mistake on printouts, we don’t throw it away. We cut it up and use it for notepaper. As a result, we take trash out only once a month, instead of once a week. And we use fewer trash bags, which saves money. We have five trash baskets in the store, and emptying them four or five times a month added up.”

Administrative costs. Control staff use of office equipment and facilities, says Hegg. “It’s little nickel-and-dime things that eat [into a business], like use of fax or copier machines for non-business use, or calls to friends outside the state,” he notes.

Lock your supply room or closet, and give one person the keys and responsibility for handing out and reordering office supplies, says Applegate.

Use the free pens, pencils, and notepads given out at trade shows. Declare an “office supply amnesty,” Applegate suggests. “Have staff go through their desks, drawers, and briefcases and use all [collected] pencils, pens, pads, paperclips, and so on.”

Periodically review supplies with staff or managers “to see what you actually have,” says Hegg. In a growing company, he notes, “some people overbuy [supplies] and hoard, while others buy the same things, not knowing the company already has some.”

Join a warehouse club store, such as Costco, says Applegate. “In addition to savings from discount prices and bulk buying, they have special hours for business members and low-interest business credit.” And consider switching phone services, which can save a business 10% to 15% in costs, she says.

Renegotiate. Solicit new bids from all vendors and suppliers of materials you use to make or package your products, suggests Applegate. “Compare prices. Renegotiate with your current vendors if you’re offered a better deal.”

Susan Light “always renegotiates all printing and paper products, like bags, packaging, or wrapping, when supplies run low. I fax a memo [for bids] to all suppliers the same day with the same deadline by which all must reply.

“It’s a cost-saver. If we can save three cents per box with another supplier with comparable velvet boxes, we go with him. The only things we don’t renegotiate are [contracts with] our jewelry suppliers.”

Inventory. Regularly review inventory, says Hegg. “What’s not selling? Clean it up, mark it down, and sell it now. If you don’t, in the long run you’ll lose cash in the insurance you pay on it, or if it gets lost, damaged, or discounted.”

“Buy inventory only from vendors who exchange one-for-one or take back products that don’t sell,” advises Joel McFadden of McFadden Designs, Greenfield, Mass. “If you do light manufacturing, savings in the diamond category can be substantial,” notes Al Solomon of Solomons Jewelers, Plainview, N.Y. “Buy loose goods for bracelets, necklaces, earrings, and rings and buy castings directly from casters. The savings will increase markup to be the most competitive.”

Margins. Protect your margins, Hegg says, especially on items that always sell well. “Add another half point or point. It will be unnoticed by most people, and those who can afford it won’t flinch. However, be sure you understand the [extent of] price sensitivity in your market.

“There has been a tendency in recent years to give margin away through across-the-counter discounts or throwing in another piece of jewelry to make a sale,” he notes. “Talk with your staff about your sales strategy, how to work with people without giving away margin, and the difference between ‘markup’ and ‘margin.’ “

Use discounts. “When buying at trade shows, be cost/price conscious,” advises one Oregon jeweler. “Most companies have discounted items that are perfectly fine and can be marked up to regular [price]. And always take advantage of ‘quick-pay’ discounts. Pay first any invoice that gives a 10-day discount.”

Giving credit. Be careful about “receivables selling,” warns Hegg—that is, through house accounts and invoice accounts. “If you give credit, it is better to use a credit card. Ask for some money up front on special orders, layaways, and repairs to protect your cash flow.

“If you give credit, have a process to quickly collect what is owed you. If you do repair work, make an appointment for people to pick up. If you wait for them to come in, the repair becomes a receivable. The sooner they pay, the quicker you can use the money.”