Sherwood Forest Inc: 5 Cost Saving Tips for Every Business
Tim Hanson sherwoodforestinc.com contact info below
intro by: Craig Berger
February 26th 2016
Tim Hanson sherwoodforestinc.com contact info below
intro by: Craig Berger
February 26th 2016
Every company needs to cut costs. But, there are myriad political and psychological headwinds along with limited bandwidth that can prohibit really making a dent. Tim, CEO of Sherwood Forest Inc., made a business out of overcoming those obstacles with ease by challenging the perceptions of many Fortune 500 companies.
BHM: What’s your personal background?
TH: I’m a preacher’s kid from Crookston, a small town in rural Northwestern Minnesota. I met my wife at Concordia College in Moorhead, MN. After graduating in 1986, I went to work in sales in the telecom industry.
We have 4 great children – Joe (21), Maria (19), Lily (14) and Sophia (9). Our son has autism, and we founded a non-profit in 2011 called Specialisterne Midwest that hires, trains and employs high-functioning individuals with autism in technical jobs.
We are active in our church, and enjoy all kinds of sports, music, farming, horses and mission trips to Central America. Giving back is a passion I apply to my family, faith and the company I founded- Sherwood Forest Inc.
BHM: How did Sherwood Forest Inc begin?
TH: After a couple of years of working in telecom, my boss and I started our own telecom resale company, where we contracted directly with AT&T for wholesale telecom rates, then offered these rates to corporations.
I learned a lot about contract tariffs and the importance of market intelligence in negotiating contracts. We found that there are huge disparities in contract pricing and terms within these contracts, regardless of the contract revenue and term.
In 1995, I founded Sherwood Forest Inc to assist corporations in negotiating telecom contracts with large telecom service providers. Telecom contracts are complicated, with lots of terms and conditions masking multiple rates and discounts. Uncovering cost savings can be daunting and time-consuming to negotiate.
Most people don’t relish the idea of going into negotiations with AT&T or Verizon. We combine greater market knowledge with specific skills tailored to negotiating with vendors in this industry. As a result, clients end up with the best contract pricing and terms in a fraction of the time it would take them to achieve those on their own.
BHM: How has your business evolved?
TH: Over the past 21 years, we’ve had the privilege of serving over 30 of the Fortune 100 corporations and 121 of the Fortune 500, as well as hundreds of other companies, large and small. Over time, clients asked what other expense areas we could impact.
We expanded into small parcel in 2005. Like telecom, there are two major service providers (UPS and FedEx), the contracts are complex and difficult to understand. The system is stacked against you if you want to negotiate. And don’t let the word “small” fool you, parcel shipping is a huge expense for many companies.
Another enormous expense is employee Healthcare benefits. It’s an ever-changing landscape that is very complicated to navigate. We’ve grown this practice dramatically in the last 3 years based on the overwhelming demand.
Other sources of convoluted contracts and missed opportunity to cut costs like software agreements and credit card processing have also become strong categories for us. And the list continues to grow.
BHM: What are some challenges most companies face in managing cost reduction?
TH: Some challenges are obvious – time constraints, relationships with vendors, etc. We have compressed the time investment necessary from clients to just a handful of hours over the course of the project, so time really shouldn’t be a factor.
In most cases, clients keep their current vendors, and we treat people the way we want to be treated, so there isn’t any collateral damage to the vendor relationship.
Perhaps one of the biggest challenges is that folks are concerned that they will look bad if we find savings. The fear is that their management may ask why they didn’t find these savings. So they simply don’t do anything.
It can be difficult to overcome this inertia. We try to point out, in a diplomatic way, that NOT doing anything actually poses more risk. Everyone has to tell their boss bad news at some time. If you can temper that bad news with a significant cost savings courtesy of Sherwood Forest Inc, then you are actively seeking a solution and proactively resolving future cost waste- so it should come out as a win!
The fact is we devote 100% of our time to evaluating and negotiating agreements with these vendors. Our category experts have, on average, 26 years of experience in their specific area. Clients just don’t have the same specific vendor expertise internally. If folks can see that the time investment is minimal, their vendors aren’t battered, and we deliver significant savings, everyone benefits.
TH: Some challenges are obvious – time constraints, relationships with vendors, etc. We have compressed the time investment necessary from clients to just a handful of hours over the course of the project, so time really shouldn’t be a factor.
In most cases, clients keep their current vendors, and we treat people the way we want to be treated, so there isn’t any collateral damage to the vendor relationship.
Perhaps one of the biggest challenges is that folks are concerned that they will look bad if we find savings. The fear is that their management may ask why they didn’t find these savings. So they simply don’t do anything.
It can be difficult to overcome this inertia. We try to point out, in a diplomatic way, that NOT doing anything actually poses more risk. Everyone has to tell their boss bad news at some time. If you can temper that bad news with a significant cost savings courtesy of Sherwood Forest Inc, then you are actively seeking a solution and proactively resolving future cost waste- so it should come out as a win!
The fact is we devote 100% of our time to evaluating and negotiating agreements with these vendors. Our category experts have, on average, 26 years of experience in their specific area. Clients just don’t have the same specific vendor expertise internally. If folks can see that the time investment is minimal, their vendors aren’t battered, and we deliver significant savings, everyone benefits.
BHM: What are the benefits of making cost reduction strategies that you service a priority?
TH: There are many benefits, including an outsized return on time invested by client executives. One that I like to mention is the impact on earnings. Some of the companies we serve operate on very thin margins – 2% to 3%. For these clients, an annual savings of $150,000 requires $7,500,000 in revenue to generate the same dollars.
In the current slow-growth economy, these savings dollars allow clients to continue employing people, fund bonuses to current staff and add new hires. Since clients rarely change vendors, they receive the best pricing and terms they qualify for from their existing vendors, so the risk is minimal. Instead, clients can devote their time to growing their businesses, innovating, and reallocating resources.
BHM: Can you give our readers a few pro-tips on business cost saving strategies?
TH: Happily. Here are my TOP FIVE.
- Admit you have a problem. Overcoming the concern that they will look bad, and getting past the idea that they are too busy to consider this.
- Create a plan and set quantifiable goals. Depending upon the expense category, savings average anywhere from 10% - 40%. The first step is for our team to gather information from the client so we can evaluate and quantify the savings opportunity.
- Evaluate resources and seek outside help if needed. We've really minimized client time requirements for us to be successful. On average, over the course of a project, total time investment by the client ranges from 2 hours to 10 hours. Usually, we can gather the necessary information from one person within the client organization, and it's easy to locate this information.
- Measure KPI’s (key performance indicators) to continually evaluate benefit. Some of these have been addressed earlier, such as the impact on earnings (how much revenue needs to be generated to net the same amount of money as generated from the savings exercise).
- A key metric to consider is return on time investment by client staff. We developed a grid showing amount of expense, amount of savings, client time investment and reward (dollars saved/hour of time investment) which is very provocative. It’s difficult to walk away from returns of several hundred thousand dollars per hour.
BHM: How can companies take charge of their vendor relationships?
TH: Never get too comfortable with your vendors. Vendor relationships are valuable and important. Clients usually have compelling reasons for selecting their vendors, and vendors provide valuable and necessary services to the client. We suggest clients take Ronald Reagan’s advice – trust but verify.
*Use market data - it’s easy to validate if vendor pricing and terms are appropriate – that’s what we do. We use the facts. It’s usually not necessary to conduct a formal RFP (request for proposal) if you have current market data.
*Take advantage of specific expertise in negotiating with vendors - If there’s room for improvement in agreements, the vendor relationship doesn’t have to suffer. We’ve had great success in managing the process, leveraging market data and vendor intelligence so clients save money while maintaining those vendor relationships.
*Play the field – it never hurts to have a small piece of business with a competitive vendor. Then the vendor isn’t tempted to take your business for granted.
*Remember who you are - most clients are also vendors or suppliers to someone else.
TH: Never get too comfortable with your vendors. Vendor relationships are valuable and important. Clients usually have compelling reasons for selecting their vendors, and vendors provide valuable and necessary services to the client. We suggest clients take Ronald Reagan’s advice – trust but verify.
*Use market data - it’s easy to validate if vendor pricing and terms are appropriate – that’s what we do. We use the facts. It’s usually not necessary to conduct a formal RFP (request for proposal) if you have current market data.
*Take advantage of specific expertise in negotiating with vendors - If there’s room for improvement in agreements, the vendor relationship doesn’t have to suffer. We’ve had great success in managing the process, leveraging market data and vendor intelligence so clients save money while maintaining those vendor relationships.
*Play the field – it never hurts to have a small piece of business with a competitive vendor. Then the vendor isn’t tempted to take your business for granted.
*Remember who you are - most clients are also vendors or suppliers to someone else.