Which Costs To Cut During A Recession
In a recession, businesses need to cut back on their costs to help them to continue to compete and be successful
. However, it is vital that those cuts are made in the right places. Cutting the wrong things can cause irreversible damage to a business.
Many companies make the mistake of cutting the easiest costs, after all it is quick and easy. However, that approach is exactly the wrong approach. In the short term it will help but not in the long term. If your cuts impact on the quality of your product or service you will lose customers and the company will ultimately fail.
The best approach is to look at each aspect of your company and ask yourself if it really contributes to delivering value to your clients. Those processes in your company that do not help you to deliver your product to your customer are where you can look at cutting back on first. However, you should still be careful; you may think that asking your staff to clean their own offices is an easy option, but is it?. After all it does not negatively affect your clients, but you may find yourself paying 12 an hour for cleaning instead of the 7 an hour you pay your current cleaner. If your staff have unproductive time maybe it is still a good option, but it probably is not for most companies.
You need a good understanding or your clients, and why they choose your product or services above those of your competitors. Your customer service and sales teams will be invaluable in this area. Include both these teams in the cost cutting process. Canvassing your clients with a simple 5 question survey can also help you to gain a further understanding of which aspects of your service are important to your clients.
Once you have worked out where you will be making your cost cuts call in your accountant to help you to work out exactly how much each cut will save the business. Lastly, set up a monitoring process that looks at the effect each cut has had on your business once it has been implemented. Make sure that each cut is really delivering the projected savings and not having a negative effect on your business.
by: Dorothy Marshall.
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