Surviving in business

If there is a silver lining to any form of crisis, it's that it really focuses a business leader's attention on better cost management. However, all too often the lessons learned in an ailing economy are forgotten when good times return.

For long-term success, keeping your expenditure low and your profit margins high has to be a top priority regardless of whatever else may be going on. But simply being a perpetual tight-wad isn't the answer.

Often, you have to spend money to make money. The key to successful cost control is understanding which expenses to trim and how to trim them.

Panic is not your friend

When the economy rumbles and your sales volume goes down and revenue is affected, you panic. When profits diminish by a little bit, you get concerned. Panic is not your friend - it leads to poor short sighted decisions.

If you eliminate what you need to operate your business and produce what you sell, you won't be able to keep up when customers do start buying again. If you lay off people, when you need trained and experience people when the economy bounces back, you will waste time recruiting and training people.

It will be your competitors who will grab them given the industry knowledge they have. Don't gift your employees to your competitors - look for every cost cutting option available. Get your heart rate back to normal and then peruse the options available.

Cheap doesn't mean smart. Cheap means cheap. Smart means making good decisions, spending where you need to and saving where you can without sacrificing the quality of your business.

Cut wisely

With this focus in place, go through every single expense. It will then be easy to decide which expense supports your core and which does not. If it does not, then reduce it to an absolute minimum or eliminate it completely. Do it all at once. Explain the reason behind it to everyone and get past it.

Forget growth projections for now. Work with what is real and what you know for sure. When you reset the business later, it will be much easier to deal with focused growth.

Maintain competitiveness

While there's no one-size-fits-all method to cut costs, simply slashing all your expenses is not the way to go. Perhaps, even more important than knowing which costs to slash is knowing which cost to spare.

Before implementing any cost cutting measures that can have a negative impact on the health of the business, as a rule of thumb all other avenues to improve your cash flow and margins should be explored. Leaders should be careful not to jeopardise the long-term competitiveness of the business.

Best option

When everyone else cuts cost and takes a pessimistic wait and see approach, you can look for opportunities to attack your competitors, to encroach into their territories and to expand your base for future growth.

However, make sure that you do not pick the bad customers or compromise on your good business principles that can affect the overall health of the business.

Remember that 'bad time' will always follow a 'good time'. When making decisions take the whole cycle into consideration and its time horizons for better judgement.