We are still getting mixed feedback from business owners in terms of whether their business is slow, normal or growing.
Given the level of uncertainty most businesses are still facing, a key discussion we often have is around the need to move quickly to protect your bottom line.
Ignoring or delaying the decision to ‘cut the fat’ from your business can significantly impact your performance, cash flow and future survival.
We suggest business owners consider 3 cost saving strategies:
- Income > expenses – Do you know your business’ break even point? A break even analysis identifies the minimum sales you require to cover your “necessary” business expenses. It requires you to calculate your total fixed costs, gross profit margin and then required sales levels.
- Reduce fixed costs – Successful businesses have their costs weighted towards variable costs. Activity based costing is a process that enables you to analyse and change your cost structure. eg could contractors provide non-core services on an as-needed basis rather than full time employees?
- Identify strengths and weaknesses – Benchmarking is a process that allows you to compare your business performance to ‘like’ businesses. eg is your gross profit margin above, below or in line with like businesses?
Of course, any change to your cost structure should be carefully considered and aligned with your business plan and future goals. You don’t want a short term fix to stop you getting to your end game.