Michelle writes for The Association of MBAs
Five Mindful Cost Cutting Tips to Help Cultivate Small Businesses
The perils of cost cutting have been in the news, both in the public and commercial sectors. For larger companies, savings to meet targets that come from ‘on high’, with no directive on where these savings should come from, can result in false economies, the undermining of basic standards, and devastation of staff morale. So for small-to-medium sized businesses, focussing on growth and increasing turnover is more of a priority. Reducing costs has obvious benefits, but it also comes with risk - it can be misinterpreted as an amber warning signal that the company is struggling - alarming both clients and staff. However, there are some strategies that could help you avoid the impression that your costing review is ‘death by a thousand cuts’ and make efficiencies an integral part of your business culture.
While large companies can employ cost managers and procurement officers to manage their savings audits, most businesses end up asking their employees to add it to their ‘to do lists.’ When everyone is working hard on cultivating leads and increasing income, there is a danger that busy staff may not look for possible savings beyond their immediate environment. If the search for increased cost efficiency goes no deeper than googling ‘cheaper suppliers’, the classic ‘savings’ tend to be cosmetic and unsustainable: think leaky pens, scratchy toilet paper, and straight-to-answerphone, call-centre-based tech support. If done correctly, cost cutting can boost both company revenues and morale. Here are some ways this can be done:
Everyone’s A Stakeholder
Aggregating suggestions and experiences equally, right across the company, can transform saving money into a team activity instead of a demoralising chore. It can also throw up unexpected efficiencies and innovations. Set clear end goals for the project, share plans, and ask for input on where the money saved could be better deployed.
Experience Comes at a Price
Professional costs, such as lawyers, accountants, and auditors, have an industry standard. Saving money on these services usually means you are hiring an assigned office junior, rather than the senior partner that you may need.
Share the Load
There are incentives out there - including VAT relief - for sharing overhead costs such as back office services and procurement. Larger corporations will often jointly procure new asset management software systems or database systems between two sister companies, for example: between a TV and publishing company within the same media conglomerate. Think laterally about potential partners.
Leave Some Wriggle Room
Make contingency part of your costings review to avoid streamlining yourself too far. It’s risky to assume your revenue stream will remain constant, especially in current economic and political times. Is your business able to function at 25% - or even 40% below average revenues? If you found yourself in that situation, how would you adapt? This question can reveal the core requirements of your company’s operation very quickly and effectively.
Stay in the Game
All too often, cost cutting initiatives begin by paring back marketing budgets and training programmes. Both send out alarm bells - to clients, observant customers, your sector, and your staff. Marketing and training are both investment opportunities. If money is really tight, investigate alternative funding - perhaps commercial partnerships with a sponsorship element, or business investment grants for training around national skills gaps.
Making money and increasing revenue will always look more attractive than saving it, but once you grasp the cost review nettle, you may be as surprised at what can be achieved with a bit of judicious weeding and pruning.
You can read the original article here.