How do you make cut backs without damaging your business? If you have to economise — like many small businesses in the current economic climate — make those cuts with care, advises Bruce Townsend
With government cut backs biting, the era of austerity is upon us. Businesses are already seeing a knock-on effect on consumer spending, and many businesses are cutting their cloth accordingly. The biggest challenge may be deciding what to cut and what to keep. Here are a few tips to help prune the dead wood, and preserve what is living.
Sure, when the upturn comes you want to be firing on all cylinders and ready to exploit it. But if you crash and burn halfway through the recession, then you won’t be able to. Don’t be a dreamer with your head in the sand, just hoping for the best. Face the realities and do what’s necessary now. Expensive long-term strategies may need to be put on ice. But don’t cut tactical activities that are delivering real value today, such as an online marketing campaign, just because they don’t fit with your eventual goal.
Keep up-to-date with what is producing results and what is not, and think ahead. Don’t let yourself be bounced into spur of the moment decisions, making cuts without properly considering the outcome. Anticipate the need to economise, and decide in advance where the axe will fall on the basis of hard facts about current performance.
When business is booming, we can afford to splash out on costly items that enhance prestige — whether it’s an expensive company car, or a big glossy advert in the best-selling industry rag. In times of limited resources indulgences have to go, however attractive they seem.
On the other hand, in good times and bad your reputation is everything. You need to invest in market awareness and listening to your customers, to keep delivering the right products at the right price. Without that, you don’t have a business. Continued focus on good customer service will help to maximise the return from your marketing, by ensuring that the customers you gain will keep coming back and buying more.
It was John Wanamaker who famously said, “Half the money I spend on advertising is wasted; the trouble is I don't know which half”. Marketing has moved on immeasurably since then, and online marketing in particular provides metrics that were unheard of in Wanamaker’s day.
Be very disciplined about measuring results from your marketing campaigns, using separate 0845 numbers, email addresses and website landing pages. Examine the statistics weekly, or even daily, allowing for any anticipated lead-time to results in each case. This will enable you to identify the most profitable activities. Drop the things that are not profitable. Hone and refine the things that are.
Let’s face it, we all make errors of judgment, and sometimes even our best ideas don’t work. If your own pet project isn’t performing, be ruthless about recognising the fact, and dump it. Don’t let jealousy or political expediency deceive you into chopping the work of a junior employee or professional rival, if it’s bearing more fruit than your own.
Every business has holy grails which no-one dare lay a hand on, either because ‘we’ve always done it that way’; or because ‘we’ve never had to manage without it, and we’ve no idea what will happen if we take it away’. If you can’t see any justification for it, then let it go. Don’t be forced by emotional attachments into cutting profitable programs to save the company dinosaur. It’s probably just a millstone round your neck.
Yes, you need to survive. But come the upturn, you want to be in a position to capitalise, and to fill the gaps left by competitors who didn’t. Don’t chop all your strategic initiatives just because the likely return looks too far into the future. Focus instead on getting value for money. When everyone is cutting costs and cutting prices, there are bargains to be had. By investing carefully now, whether in staff, infrastructure or brand-building, you can build a strong platform from which to launch out when growth returns.
For more advice on keeping costs down, see: