One of the biggest challenges that smaller businesses face is cost control, especially during periods of growth and expansion. It can often be one of the most difficult aspects of running a business and the reason why so many ultimately lose the battle to survive. So often one hears the expression that “Cash is King “and in small and medium sized businesses this is totally relevant every single day. It is very difficult to balance cash flow effectively in both the earlier stages of a business’ life and during both expected and unexpected critical stages of its development. These cash flow restrictions can also make it more difficult to either raise or plan the raising of cost-effective finance just at the time that it is needed the most.
In my earlier career I met and worked with a business owner who was obsessed with cost control and passed on his ethos to many of us who were either starting or running small businesses. He had a sign on the wall behind his desk that read “The first profit is always in the buying”. His message was basically based around never buying anything that you don’t need and getting rid of excess and unneeded overheads and costs as regularly as possible. This was mixed with his ability, well before the digital age, to thoroughly research every single purchase made and ensure that he always bought lasting quality and performance at the fairest possible price. He never upset suppliers and service providers and built lasting and reciprocal relationships with them all. His ethos and methodology are still as relevant today as it was three decades ago. We got on even better after I put a sign up behind my desk that I had been given by my father when I was an over spending latter year teenager: “ He who buys what he does not need, soon will need what he cannot buy “
Whilst it is impossible to cut out all unnecessary costs in business it is essential to regularly and thoroughly review every single cost on a regular basis. So often businesses make changes to the way that they operate but forget to investigate the full cost saving potential of doing so. They may overlook combining suppliers or changing terms of current contracts as an example and have as a result missed an opportunity to evaluate and potentially cut costs.
Ideally and irrespective of any other reviews all costs need to be looked at and assessed on a regular and planned basis at least once a year and possibly more often if larger changes or expansion has taken place.
Cost planning and buying procedures are easy to put into place and then adhere to with regular reviews and agreed policies that are then strictly adhered to and closely monitored.
We have recently helped companies in the SME sector to reduce costs in areas that they had never considered before, assuming that they had the best contracts possible in place and total control over all of their costs. One example of this was a massive saving that we identified in telecoms and general communications within a business with over 50 employees who were working across the country, some from home and serviced offices, and dealing with customers all over the World. We helped them to move to a single communications strategy and make a welcome and unexpected significant cost saving. During the process they were also able to identify other cost savings through the implementation of new and more efficient procedures. We have worked with businesses that have needed to reduce costs in all areas and have sometimes helped them to reduce their costs by up to 20-25% in the first year.
Over the years I have met and worked with many small businesses and have watched on as several have rapidly grown before suddenly and almost unexpectedly vanishing overnight. Most of these have in some shape or form fallen victim to uncontrolled costs overtaking growth in revenue.
I have also equally worked over many years with businesses that have grown slowly and successfully and have always been totally in control of all their costs. The majority of these are still trading today or have been taken over.
Remember that cash is king, and the controlling of business costs is essential in the quest to succeed and survive.