Let Cost reduction and Cost avoidance be vital strategies which are incorporated into a successful business plan for 2020 and beyond.
No matter what your business is or what it deals in, the principles for success are all the same. There is no such premise as ‘But we are Different’ – This approach is just a cop-out for an inability to face the reality of a challenging commercial future.
The economic slowdown will impact Australia this year and beyond with the uncertainty in trade agreements and political tensions around the globe which all have a trickle down effect on businesses and their abilities to sustain ongoing growth and profit.
However, smart companies who have strategised correctly will emerge even stronger from this period and will be in a position to leverage the new opportunities these challenging times will bring.
I saying this, a critical element in growing sustainably will be to understand the true costs of doing business including realigning your focus to include core and profitable assets.
Some ideas which could assist your future which I have used successfully could be:
- Review all investments and partnerships to ascertain the real value they generate for the business
- Review all products, processes, and projects to identify a contribution profit % and either divest and or accelerate improvements which realise sustainable growth and profit
- Review management structures and ensure you initiate a seamless and lean organisation where individual job descriptions provide both accountability and authority levels which add value to the business
- Review each customer portfolio and assess a profit contribution % and then strategise to either gain cost increases if required or cut from the sales budget
- Review and link salaries in line with performance. This could be an incentive based approach ensuring you are always lining up with industry standards and statutory requirements
- Review all current suppliers and look at opportunities for re-negotiations relative to cost-downs, cost avoidance’s or improved buying patterns
- Review in-sourcing v outsourcing with a goal of achieving sustainable economic benefits and the health of the business
- Review cost cutting opportunities in areas of overhead expenses such as tax structuring, R&D tax incentives, legal, real-estate/rental/leasing, travel, entertainment
These are just a few areas where sustainable cost improvements can give the business an improved operational profit, however, they are areas which require continual focus and make them part of the ‘Vital Signs’ of a successful future.
All cost cutting initiatives must be strategic and deliver the sustainable growth and profit which will set you apart from others and bring ‘Best Practice’ management to the business .
You need to differentiate between good costs and bad costs:
- Good costs are necessary for the future sustainable growth and profit of the business
- Bad costs are superfluous and do not support growth and profit
If I can be of any assistance please feel free to contact me.
