You Cannot Cut Your Way to Success

The #1 reason we work is to make money. Profit = revenue – costs.

Unfortunately, it’s pretty normal to only really examine your business as you go through a rough patch. So, how do we get those profits back up? If you choose to cut costs, be careful because you can cut too deep. You can cut so deep that you actually do more harm than good.

Of course, we should always be vigilant with costs.  If your overheads are not managed properly they can get out of control and become an ever-tightening noose around your business’ neck. Costs can restrict growth, drain cashflow and generally make everything rather horrible.  In the words of our Sweat2Sweet Business Improvement program, your business becomes ‘sweaty’.

What if your costs were already at the very minimum for your business to operate at an optimal level? What happens when business picks up again? You’re going to need some overheads in place to be able to cope with the additional work.

Reducing them further will simply impinge on your ability to do trade and your business will start to sink.

You’re a business owner. An entrepreneur. Think about why you do the work you do. If you haven’t already, make a list of what your priorities and goals are. It’s too easy to get bogged down in the day-to-day and forget the bigger picture.

It can be better to consider growing your revenues instead of slashing at your expenses. Revenues are limited only by your cashflow and your production capabilities. There is space for innovation here and it’s a lot more positive for you and your team to be looking forward rather than looking back.

Of the five ways to grow your business …

  • keep your existing customers
  • get more and of the type you want
  • increase the frequency of them buying from you
  • increase the average dollar value of each sale
  • improve each of the processes of your business

… four of them are about sales.  Only one relates to inside the business.

Invest your energy into the other side of the equation. Grow. Do.

www.accountriks.com

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