Cost Cutting In The Right Places
Cost-cutting is a healthy business practice that should be routinely performed, even when your business is doing well. At times like these, the task is fairly straightforward and you can perform the operation with clear objectives. On the other hand, when your business is in trouble and your financial crisis is growing, you begin to lose focus and start cutting every penny in every corner.
With this approach, a lot of businesspeople cut the wrong costs, sometimes even cutting the lifeblood of the business. They start cutting advertising and marketing costs, and guess what?
They just cut their own throat. They just killed the resource that could bring their business out of its crisis. Instead of cutting marketing and advertising costs, an effective plan would be to increase your budget in those areas by shifting the funds from other places where you CAN cut costs.
How is this possible? What do you do? Well, you’re in crisis mode. Step back, take a breath, and do the following:
1) Figure out the problem that is causing your financial crisis.
2) Change your approach and focus your business.
3) Set up a campaign to implement this new approach that will draw a lot of traffic which can be converted into revenue.
Here’s an example:
You have a computer store, and you find out you have overextended yourself with too many product lines and accessories that don’t relate directly to computers. They are just bogging down your business with too much inventory, extra staff, extra storage, insurance, etc.
Change Your Approach:
You determine that it would be more manageable to become a specialist in computer sales and repairs. (This would also be a good time to add a HOT new product line in the computer department.) Your first step is to eliminate the following departments: office supplies, office furniture, and cell phones.
Liquidate all the other departments, But don’t return the inventory to your suppliers because you’ll have to pay a 10% restocking fee. Instead, turn it into a public relations opportunity by having a huge liquidation sale and pass on the savings to your customers.
In this example, it would be a good idea to take out a full-page ad in your local paper announcing that you will be having this sale because you wish to focus on your core business: computers. Also state that you’re liquidating all other departments, and you are “going to pass these savings on to you, our valued customers. All products excluding computers and their accessories will be 10% BELOW COST!”
What has happened in the above example? You went from a state of chaos to a state of eliminating all the extra costs involved in running the other departments. Your business is now focused, and if you ran the sale properly, with all that traffic you should have made a huge profit on the sales of new computers and repairs, as well. The sale gave you the PERFECT opportunity to introduce your new computer related products to new customers as well as to serve your existing ones!
Cost Cutting can be rewarding for both you and your customers. All you have to do is ask yourself a few key questions, and focus on both your core business and what your customers want and need.
That’s the way I see it.
A Touch of Business.com