Each Monday we focus on one activity you can do today or over the next week to build yourself a better business. These short, actionable posts will show you what steps you need to take to take your business to the next level.
In case you’ve missed the previous posts, you can catch up here: 20 Days to Build A Better Business.
This is Day 6: Know Where Your Money Goes
Whether we are in recession or not, everyone knows that the economy currently has it’s challenges. Making money today is tough, there is no doubt about it. So, there’s no point in giving it away needlesslessly when you don’t have to. Any money that is internally generated (ie from savings) could be used to pay down debt or allow you to take advantages of situations as they occur e.g. acquisitions, favourable pricing or investing in your business.
If you would know the value of money, go and try to borrow some; for he that goes a borrowing goes a sorrowing.
BENJAMIN FRANKLIN
Being in a tough economic environment gives you the excuse and the incentive to examine your costs like you’ve never done before. The actions that you take now to reduce your cost base could have significant implications when the economy does eventually turn and allow you to make even more money.
The first place to start saving money is look at where your money goes. What do you spend it on?
Once you’ve worked out what your money gets spent on, ask yourself these questions:
Cost of supply
* Is your business making and buying the right things?
* Is the company eliminating waste?
* Are the operations completely aligned to the end consumer?
* Can we employ smarter procurement techniques?
Value creation
* Does your management team understand where value is being created?
* Which products make you the most money and which products loose money?
* What profits are your activities generating and where are you wasting money?
Business structures
* Is your company organised to service your customers in the lowest cost way?
* How much do you spend on business support? Is this appropriate?
* How much overhead creates value and how much is just overhead?
Controlling your people costs
* What are your people doing to maximise profit and minimise waste?
* What are you doing all you can to reduce your people-related costs such as holiday, pensions, share schemes, sickness pay, benefits and car schemes?
* Are you doing tasks that could be done more cheaply elsewhere (outsourcing activities)?
Cost culture
* Long term, how do you keep out cost creep?
* Are your business processes and practices aligned to keep costs down?
Spend today (and the rest of this week) asking yourself these questions and commit to do something where the biggest opportunities lie.
