Extraordinary Business: Trim the Fat! Step 6 of 7 in How to Thrive in a Down Economy

Trim the Fat! Step 6 of 7 in How to Thrive in a Down Economy

The last newsletter was Step 5 - Take a hard look at your customer experience.  In that article, we discussed 3 main areas:  1) we looked at your systems to evaluate if you were providing a consistent customer experience, 2) we discussed the importance of innovation and the "wow" factor to set your company apart, and 3) finally, we covered the importance of having a company culture geared toward service.

Now it's time to take a closer look at expenses and....Trim the Fat!

Negotiate with your Vendors...

Most business owners and executives believe they've cut every expense possible, but if you haven't renegotiated with your suppliers within the last 6 months, it's time to try again.  Reducing the costs of each element that goes into creating your product or service is crucial to stay profitable.  Even a few cents on each item can make a huge difference overall.  

Another point - if you are only using one source for your supplies, you could be at risk.  Trusting one vendor for all your materials can be dangerous, both from an expense side as well as an operational side.  These days, a vendor could go out of business at a moment's notice and you could impede your own production.  Or, just as bad, they may not be competitively priced. 

Review your Fixed Costs...

Right after renegotiating your variable expenses, you should review your fixed overhead costs.  Have you renegotiated your rent, cell phone expenses, or insurance lately?  If not, it's time to do it.  Even reviewing those overhead costs that don't feel negotiable, should be considered.  You may not be able to control what you pay for heat, but you can turn down the thermostat.  You may still need to buy office supplies, but can you get buy with a less expensive version or find a better deal?  Take a look at it all and find a way to trim, trim, trim. 

Look at Employee Costs...

Productivity is key in a down economy, so make sure YOU and EVERY employee are utilizing your time to its fullest.  To do that, identify each job's KPI's - Key Performance Indicators.  Ask, "How can we measure success for this job?" And, "If this position is performing at top level, what will that measurement be?"  Be specific and realistic in your measurement and hold yourself and everyone in the company to those standards.

Secondly, confirm that everyone is working at a minimum of 70% capacity.  If sales are down, the team may not have as much to do.  In that case, you either MUST increase sales or reduce the workforce.  While painful, it may be your only alternative to staying in business.

Bottom Line:  Even though many decision makers have cut expenses, it pays to review areas that may have appeared as Non-negotiable in the past and/or to be more creative with productivity and capacity. 

The final step in our series - Step Seven:  Cash is KING (coming in two weeks!)

To Your Success,

Dawn Drozd
ActionCOACH Business Coaching

I'd really like to hear from each of you...what creative ways have you found to cut expenses and how do you know when you've cut too deep?