In the previous post, we talked about five common forms of cost-cutting that do more harm than good, and the reality that when revenues are coming in below plan, sometimes cost reductions are essential. Let’s take a look at three safer and more effective strategies that can deliver significant results, plus I’ll give you access to additional learning resources that will help you create a plan for results.
1. Find 1% or more from all key suppliers. Now, I don’t want you to beat them up – let’s do this with integrity. Are you a good customer who pays bills promptly and is easy to get along with? That’s worth something. So approach each of your key suppliers and ask them how you can find a way to lower your costs with them by 1% or more, and then say nothing more – let them use their creativity to come up with something. I received an ecstatic call from a seminar participant a few months ago, sharing that the very first supplier they’d contacted immediately offered them 5% – just for asking! You’ll likely find that suppliers will offer incentives for prompt payment if cash flow is of value to them, they may suggest different ordering quantities or mixes that are easier for them to provide, they may have co-op dollars or other incentive programs in place, they may be willing to provide an incentive if you’re able to do more business with them rather than spreading it amongst competitors. The key is to ask in a generic way… and wait for them to respond.
2. Get the sludge out: I talked last week and in an earlier blog post about profit leaks and sludge that creep into every business regardless of how well it’s managed, and I have just one question for you as an indicator. Did you know that just 5 categories of issues cause 80% of the unnecessary costs to serve? Get even one of those categories tamed, and you’ll see a lot more than a 1% improvement. The trick is to get rid of the costs that shouldn’t be there in the first place, so I’m going to point you to a complimentary set of 3 training videos that go into much more depth than I’m able to here. Share them with your team and take the next steps.
3. Trim Staff and salaries the RIGHT way: Last week I shared the impact that short-term downsizing has on morale, productivity, corporate conscience, and institutional memory – it’s far too costly to even think about cutting staff unless it’s permanent, and you can’t cut your way to growth. Similarly, the damage that salary cuts have on those same factors makes this a highly unpalatable option too.
There’s a third option that’s often overlooked… a minimally paid or unpaid leave of absence to go and do something on their bucket list. Surprise! Many of your employees have dreams beyond simply working 9-5, but the challenge is that few have the resources to quit, live their dream, and then face a prolonged job search. If you know that your salary line is unsupportable in the short term, simply ask your employees if they have big dreams… of going back to school, traveling, writing a book, being at home more days per week with their kids during the young years – explore! Then, find a way to create a win-win that helps your company AND your employees do what they need to do.
What’s the most creative way you’ve ever found to eliminate unnecessary costs, without draconian cost-cutting?