Your Sales are dropping, customers are sparse, and employees twiddle their thumbs (whatever that looks like). First gut reaction; cut costs! Whoever said that you should always follow your gut had no clue. Let’s follow this thought through. My sales have dropped so I am going to cut needed resources in order to rebuild my sales. With fewer resources I will have fewer bills and thus can hold on to my business until things get better. Nice thought, but you better hold on real tight, because with this plan you are in for a wild ride to the bottom.
Your first error is to assume that things will get better. They won’t, you have to make things better. “Holding on” to a sinking ship will only get you wet. When there is a hole in a ship you have to patch the hole. What do you need to make the patch? You needed the resources that you just threw overboard. I hope you can swim!
I am being harsh, true, but the bottom line is that a struggling business has never been saved by cutting needed resources. Yet, this seems to be the most common approach when trying to turn a business around. Yes, many companies need to find ways to streamline their organizations, and this can include making tuff decisions such as layoffs, plant closures, and operational budget cuts. The difference is that these cuts aren’t knee jerk reactions. They are calculated plans. It’s ok to circle the wagons, but with purpose. How do you know what to cut and when to cut it? It all comes back to understanding that bills don’t cause failure. The improper use of bills causes the failure.
The improper use of bills comes in two forms; 1) Purchasing things that you don’t need, and 2) not purchasing things that you do need. Most would assume that the second issue is a result of the first, but this is not always true. Many businesses are so afraid to spend money that they end up “saving” themselves out of business. Failing to make proper repairs on equipment and buildings, not hiring the more qualified (and more expensive) employees, reducing inventory levels, substituting lower quality ingredients (or materials). All of these things are sure-fire signs that you are running your business into the ground. This is just as dangerous; perhaps even more so, then spending money on unneeded things. If you start overspending you can always adjust, but once your company gets a bad reputation it is very hard to turn things around.
You can’t make your business thrive if you are starving it. All successful organizations have one thing in common; they spend money where it is needed to ensure a great product is produced. All unsuccessful businesses have one thing in common; they tried to go cheap in one way or another. Of course, there are other factors involved in success or failure but bills are the thread that links every business to the same fate. Bills put everyone on the same playing ground. What you build on that ground is up to you.
