|Strategic Planning Information|
Cost-cutting Essential to Maintaining Profits
Why cut costs now?
It should be obvious, but sometimes it is not. One of the lessons of the Dot-Com debacle is that many of the companies went belly up due to profligate spending by the executives.
Of course, you would like to achieve high profits by having a record-breaking sales year, but that may not be likely to happen this year given all of the uncertainties of the economy and the political situation. Levels of sales success are certainly unpredictable.
The level of sales, however, is only one ingredient in the recipe for success. You must also be interested in keeping your costs as low as you can, because the real number to watch is your profit, the difference between your income and your spending. Remember that this year can be more successful than last year even with lower sales if you can reduce your spending enough.
To increase profits, you can either increase your income, reduce your spending, or both. As your salespeople are aggressively searching for additional customers as well as seeking opportunities for more sales to existing customers, the rest of the employees can work on the other end: reducing costs. If sales are lackluster or even dismal, your cost-reduction efforts can ensure your survival. On the other hand, if sales are great, you can use them to achieve a banner year.
Get everyone involved
Reduced travel - Many meetings formerly held in person are now managed by video-conference or simply by teleconference. Perhaps even senior managers can reduce their in-person meetings from one a month to one per year.
Increased use of e-mail - Communications that once took place in person or by phone are now routinely done by e-mail. Even faxes are beginning to use network connections rather than more costly telephone lines.
Economy of scale - By combining the purchasing power of multiple sites, you can reduce the cost of routine purchases, such as uniforms, computers, and office furniture by obtaining volume discounts from your suppliers. Negotiating new leases for photocopiers and other equipment might save you thousands of dollars per month.
Increased utilization - If you can increase the percentage of time each employee is doing productive work, you can save a lot of money. Encourage employees to use their down time either for gaining additional training or for seeking ways to improve the efficiency of their processes.
Seek suggestions from employees - Ask your people, "How can we accomplish the same thing for less money?" You will be surprised at the creativity they have. At my company, for example, in response to an employee suggestion, water coolers placed at strategic locations throughout the plant have replaced providing individual bottles of water to employees. This has already resulted in a significant savings per week.
Better use of copiers - Employees can save considerable copying expense by using color copiers only for final drafts and increase the incidence of two-sided copying.
How can we cut costs even more?
Investments must continue
Some things you should not cut. For instance, you must not cut expenditures your need for facility upkeep or upgrades or to keep pace with technological advances. Neither can you afford to cut back the service you offer to your customers. They must continue to receive the best service you can deliver, combined with the speed and accuracy they have come to expect.
In reality, these are all investments rather than costs. You cannot afford to neglect your investments in facilities, technology, and your people. The long-term costs would be too high.
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Copyright ©2005 Steve Singleton, All rights reserved.
Steve Singleton has written and edited several books and numerous articles on subjects of interest to Bible students. He has been a book editor, newspaper reporter, news editor, and public relations consultant. He has taught Greek, Bible, and religious studies courses Bible college, university, and adult education programs. He has taught seminars and workshops in 11 states and the Caribbean.
Go to his DeeperStudy.org for Bible study resources, no matter what your level of expertise. Explore "The Shallows," plumb "The Depths," or use the well-organized "Study Links" for original sources in English translation. Sign up for Steve's free "DeeperStudy Newsletter."
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