What to Cut, What NOT to Cut

The last in a series from Chuck McKay:

Cut Overhead - Surviving The Recession - Part 7 of 7

For the last week, as we've discussed steps to cope with the Recession of 2008, we've assumed that the recession actually exists.

But, what if you agree with Federal Reserve Chairman Ben Bernanke?

The Chairman tells us that a recession, by definition, is two consecutive fiscal quarters of “negative growth.” He says we're not there, yet.

Maybe he's right.

But, by the time Chairman Bernanke makes it official, we're likely to be more than half way through it. The time to prepare is NOW.

If it doesn't happen, there'll be time to celebrate when our companies are healthy.

And the last of our seven steps is Cut Overhead.


Its not likely you'll find one big cut.

What's very likely is that you'll find several smaller cuts that will add up to significant amounts, and every dollar you save can be the equivalent of ten dollars in before tax earnings. You can't save your way to prosperity, but this exercise will help you find ways to free up operational cash.

Question every single expense. Look everywhere for savings. Do you need six incoming telephone lines? Do you need company box seats at the stadium? Do you need a company membership to the country club?

If you need them, keep them. If you have trouble justifying these expenses, cut them. Every single expense needs to be considered.


When you're done eliminating, reduce.

Replace your incandescent lamps with fluorescents. Shut off the lights in rooms that aren't being used.

Turn up (or down) the thermostat evenings and weekends.

Price awnings for your windows to cut down on the amount of direct sunlight, which will help your building stay cooler.

Save gasoline by assigning specific days to deliver, and planing the most efficient routes. (UPS has taken route planning to an art form by strategizing only right turns. It saves them time sitting at red lights).

Compare telephone service and long distance charges, and consider changing carriers. Do the same with your cellular carriers. You may find it less expensive to pay an early termination fee in order to move to a carrier with unlimited long distance, for instance.

How much can you reduce your inventory? It's listed as an asset, but it also ties up operating capital. Don't carry larger inventories than you need, and research just-in-time delivery with your suppliers. Stock slightly deeper in units that turn quickly, and reduce your holdings in low demand items.

We've already mentioned re-negotiating rent or reducing the space you rent, but consider that during a recession real estate prices fall. When landlords compare your low-ball offer to the zero revenue they're presently getting on unoccupied property, you may find it surprisingly easy to move to a less expensive facility.

What not to cut.

You won't have loyal customers without first having loyal employees. Your employees will understand if you cut back on non-essentials, but they will resent any reduction of their compensation. Cutbacks in contributions to retirement programs, or in holiday gift programs will create more long-term resentment than you will gain, short-term.


Reducing overhead is the last step.

Our seven steps to surviving, and thriving, in recessionary times, are:

Concentrate on business and customer service.




Cherish your existing customers.




Accelerate your advertising and PR.




Adjust your staffing.




Lower your profit margins.




Speed up cash flow.




Cut overhead.

Nothing will make your business recession proof, but implementing these steps will help you not only survive, but to profit during hard times.

And, one last thought.

Companies who aggressively promote themselves during economic downturns end up the big growth stories of the following few years.

Shall we get started?
__________

Chuck McKay is a marketing consultant who helps customers discover, and choose your business. Questions about helping your business thrive during an economic recession may be directed to ChuckMcKay@ChuckMcKayOnLine.com.

Sphere: Related Content