Business Cost Cutting In The Right Place
Cost-cutting is a healthy business practice that should be routinely performed, even when your business is doing well.
When your business is in good shape, cost-cutting is relatively straightforward.
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 managers cut the costs in the wrong areas, sometimes even cutting the business lifeblood. They start cutting advertising and marketing costs, and guess what?
They cut their own throat and 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 use the following as an example.
1) Figure out the problem that is causing your financial crisis and focus on solutions to eliminate the problem.
2) Change the approach
3) Set up a campaign to implement this new approach that will draw in more business to increase revenue.
Let’s use a computer store in this example:
You have a computer store, and you find out you have overextended yourself with too many product lines and accessories. They are just bogging down your business with too much inventory, extra staff, extra storage, insurance, etc.
The departments are not profitable and keeping you from focusing on your core business.
Change Your Approach:
You determine that it would be more profitable to become a specialist in computer sales and repairs. Your first step is to eliminate the office supplies and office furniture departments.
Liquidate all the other departments, have a 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 changing your business model and focusing on your core business of computer sales and repairs. State that you’re liquidating all other departments, and you are going to pass these savings on to your customers. All products excluding computers and their accessories will be up to 75% off.
What has happened in the above example? You went from a state of chaos to eliminating all the extra costs involved in running the other departments. Your business is now focused, and if you run the sale, you’ll end up with the money you need to execute your business’s new direction. The sale allowed you to introduce your new computer related products to new customers and 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.