Before getting a good deal on office space from an
out-of-business dotcom, Earl Mollerud's office was on the third
floor of a wing of a church. "It was tough during the summer
because they didn't have air conditioning, and during the fall
they were slow about turning on the heat," says the CEO and
co-founder of Kids' Hair Inc. in Minneapolis. But, he notes,
the rent was a saintly $500 per month.
Today, Mollerud, 40, cuts the cost of getting supplies to his 10
Kids' Hair salons by ordering centrally and stocking
consumables at headquarters. Each Monday, managers return from
sales meetings bearing a week's worth of hair-cutting supplies.
"Instead of having somebody drive around delivering," he
says, "they just take it back in their cars."
But Mollerud is no miser. In an industry where employee benefits
of any kind are rare, he offers stylists a company-paid health
insurance plan. "And it's the best one we can get,"
he adds. And while other stylists book appointments in cheap paper
planners, Kids' Hair has invested in a central computerized
appointment system that contains information on customers'
personal hair problems, preferred hair styles, frequency of visits
and other grooming concerns.
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There's really no conflict between Mollerud's spending
on some items and pinching on others. He and entrepreneurs like him
use a technique resembling liposuction, a surgical procedure that
removes fat from areas where it's not needed or wanted, to
target only certain costs for removal. Rather than putting their
entire organizations on stringent diets, they siphon off only costs
that add no value. In the process, they say, their profits grow,
their companies get stronger, and their understanding of their
businesses increases.
Originally published in the March 2001 issue of Entrepreneur Magazine
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