Smarter Cost Cutting

There are two ways – and only two ways – of cutting costs in any business. The dumb way and the smart way.

Cutting costs the dumb way is easy. You will have seen, and probably experienced, that many times in the course of your career.

Dumb cost cutting is when an army of spreadsheet jockeys, equipped only with a copy of Microsoft Excel, change a formula here, reduce a percentage there, and delay an investment by a year or two somewhere else, all to make sure the number in the bottom right-hand corner of a spreadsheet is the number they want it to be.

Thankfully for them…but bad news for everyone else…they’ll be long gone by the time those chickens come home to roost. They’ll be off somewhere else, having lit the fuse that makes an organisation self-destruct from the inside, even while they’re taking a victory lap to claim their promise of saving a six or seven-figure sum has been a great success.

However if you run your own business, or you run a larger business but are somehow still in possession of a functioning conscience, you know that penny-wise, pound foolish, short-term decisions will almost certainly cause much bigger problems a couple of months down the road than the ones the spreadsheet jockeys have swept under the carpet today.

Dumb and dumber

There is almost no limit to the dumb manoeuvres I’ve seen in my 25 years as a CFO, CEO, Chairman and Non-Executive Director.

Like the place I worked where they closed the sales department…but couldn’t work out why they were selling a lot less than they used to.

Or the place where their response to an aggressive competitor ramping up their marketing was to slash the marketing budget as part of an organisation-wide “10% off all budgets – no exceptions” edict from on high.

Or the place where they ramped up sales on loss-making products, thereby reducing capacity in the factory to produce things we actually made some money on…with probably predictable consequences for our bottom line results.

And I’m by no means unique, or spectacularly unlucky. You’ve almost certainly seen decision-making like this yourself. Maybe even been on the receiving end of it, and seen the havoc it causes.

Cheap is expensive

Cutting costs is easy if you don’t care about the consequences.

Want to save half your call-centre costs? Easy – just fire half your staff, the spreadsheet jockeys say. It won’t be their problem when customers can’t get through on the phone to place an order three or four months from now.

Want to cut your marketing costs by half? Easy – just scale back your media spend by 50%. Of course, a few months from now you’ll find your new leads scaling back by a similar amount, but hey, short term that looks great doesn’t it?

Want to cut your production costs in half? Easy – somewhere in the world people earning $1 a day using 50 year-old machinery could probably produce something 80% as good as you make today and you could pocket the difference. But when your customers start demanding refunds, and your business gets a reputation for poor quality, that’s not going to look like such a good decision any more.

Of course, these are extreme examples to make a point, but the disconnect between managing costs and creating profits is enormous in most organisation.

Aided and abetted, it has to be said, by people who stand to make substantial profits from convincing you that their magic solution will melt all your costs away and leave everything else running exactly as it is now.

But it never works in the long run. And that because the energy around “cost cutting” the dumb way is all in the wrong place.

Build value, don’t cut cost

There is an alternative to traditional dumb cost cutting strategies – and that’s what we call Smarter Cost Cutting around here.

Smarter Cost Cutting is all about building value. While that can mean reducing spend in some targeted areas, more often it’s about taking decisions which preserve and enhance your ability to grow sales and increase profits, without getting side-tracked into penny-wise, pound foolish decisions that only work in the short term, before coming back to bite you a few months from now.

Think about it. Would you pay 10% more for leads than you do now if those leads were 50% more likely to convert into a sale? Of course you would.

What about getting 20% more production through your factory without increasing your costs…what would that do for your profits and cash flow?

What if you could charge 30% more for what you sell, even though the extra cost to you is little or nothing…and customers, rather than resisting, are happy to pay more for what you sell them…how would that look on your bottom line?

It’s counter-intuitive, but maximising value instead of getting randomly cutting costs on a spreadsheet is your best path for sustainable, reliable, long-term growth in sales, profits, and cash flow.

The Smarter Cost Cutting Process

Of course, there are times when dramatically slashing your cost base is exactly the right thing to do – at least in some areas of your business.

And there are times when you end up causing more problems than you solve by just slashing costs right, left and centre according to the whims of whichever spreadsheet jockey is riding your horse today.

The key to Smarter Cost Cutting is knowing the difference. And that’s where our methodology comes into play.

Smarter Cost Cutting is the exact approach I’ve used to save 56% in costs in one business, nearly 40% in another, and even to save £500,000 in HR expenses while building one of the UK’s Best Companies to Work For.

Identifying the areas you can pare back to the bone – or even eliminate entirely – and the areas where your biggest return comes from spending more, not less, is crucial if you want to cut costs the smart way instead of the dumb way.

Smarter Cost Cutting also takes a business-wide approach instead of focusing on one narrow part of the business and paring back costs there. Inevitably there are choices and trade-offs to make to maximise the potential of Smarter Cost Cutting. This has to be owned from the very top of the organisation because nobody else has the authority or breadth of responsibility to make this happen.

For that reason, we only work with business owners and senior executives in our Smarter Cost Cutting programmes.

Smarter Cost Cutting is a “done with you” programme, not a “done for you” programme because, quite simply, it’s the way to get your maximum value in your cost cutting efforts.

The precise nature and structure of the programme depends on your business objectives and the industry you work in. All Smarter Cost Cutting programmes are tailored to your specific needs.

However they do all start off the same way. With a Smarter Cost Cutting Strategy Session.

This is a personal, one-to-one session, and there is no charge for it. During your Smarter Cost Cutting Strategy Session we’ll explore the potential for accelerating sales, minimising costs and boosting profits in your business. We’ll explore how to dismantle the blocks which are holding you back. And we’ll develop a detailed plan for the next 90 days to deliver the maximum amount of additional profit and cash flow in the minimum amount of time.

You get all that by visiting the link below and completing a short (five brief questions – takes two minutes or less) application form. We’ll be in touch to arrange your Smarter Cost Cutting Strategy Session just as soon as we have reviewed your application.

Your free Smarter Cost Cutting Strategy Sessions is only available for a limited time and is strictly by application.

All the details are here ==> Your Smarter Cost Cutting Strategy Session.

Get started today in under two minutes. I look forward to speaking with you soon.

Alastair Thomson
Founder, Bottom Line Business Coaching

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