
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. |