Strategic Business Solutions
| Smart cost cutting and other tips in preparing for the economic rebound |
| Published Wednesday, September 30, 2009 7:00 am |
by Jeff Bolton
Although financial prognosticators do not agree on the timing of an economic rebound, most believe that an upturn is inevitable. When it does occur, gaining an edge on the competition will be crucial. Therefore, managers and owners should position themselves now to benefit from the eventual turnaround.
The basic tenets of positioning focus on reducing inefficiencies and generating new sources of revenue. Here are several particulars to consider:
Cut costs smartly. Most companies have been in a cost-cutting mode for the past year, but not all cutbacks are sensible. For example, companies that abruptly fire workers, close down 401(k) plans and downsize facilities are not using a long-term approach. Cutting back on inefficiencies and streamlining operations to eliminate waste can be much more effective in reducing expenses, but requires a more delicate balancing act. Seek to maintain a positive cash flow while minimizing costs. Through a balance sheet analysis, identify areas where you could be saving money on a recurring and long-term basis that will strengthen your company from within for the long run.
Focus on long-term objectives. The idea is to sustain growth over a period of time, so try to avoid the shortsighted methodology so common in today's economy. Do not place undue emphasis on the ebbs and flows of the current revenue stream. Concentrate on the long-term impact for the company and incorporate that approach into decision-making on a daily basis. Prepare a forecast not only of your financial situation, but also of your company's goals and objectives in one, three and five year increments. Develop a strategy for meeting those goals and objectives and put it in practice now.
Emphasize value, not price. If clients are buying your services or products based solely on price, it will be difficult to sustain growth for any length of time. Eventually, someone will undercut the price. Instead, focus on helping clients meet their needs at a reasonable cost. Take the extra time now to get to know your clients, understand their wants and share your knowledge and expertise with them. Providing better value for the money is typically beneficial for long-term client relationships and may also help drive in new business through referrals from your satisfied clients.
Define "value" in clear language. Make sure that proposals include intended results, how they will be identified and how they will be tracked. Clarify expectations for additional revenue or profits, and quantify those projections. This provides a blueprint for measuring success in monetary terms. Caution: do not limit this to clients - it is just as important that employees understand what the company is attempting to achieve. Provide training to your staff on your company's value proposition and the methodology behind it.
Establish new revenue sources. At the core, the company must sell more products or services to current clients or identify new clients. This will usually take some creativity. The company may have to change the way it operates or the way it presents its goods and services. Such change can be challenging for many firms, but innovation can lead to greater profitability down the road. "Thinking outside the box" may be an over-used phrase, but in this case, it is applicable. Consider which revenue sources are currently untapped that would be a good fit for your company and take the time to explore them now.
Expand horizons. Frequently, company owners become stuck serving one or two industries, or they only make a special product or provide one particular service. Consider expansion into other sectors, markets or even different countries. What do you do well? Where might additional value be provided as a supplement to your current offering? Is there a complementary service or product that would increase your credibility, recognition or profitability? The key is to keep an open mind and move quickly to capitalize on new opportunities as they arise.
Now is the time to address these issues. Do not wait until the economic recovery is already in full swing - by then, it may be too late. Contact us today - we can help. In addition to performing an analysis of your balance sheet and income statements in order to help you identify cost reduction opportunities, we can also assist you with business strategies that will help you be in the optimal position for growth and prosperity going forward. We are more than accountants. We are trusted advisors.
Jeffrey A. Bolton, CPA is a co-founder, Partner, and member of the firm's Executive Committee. He works closely with our Entrepreneurial Services and Strategic Business Solutions groups. As an experienced CPA, Jeff provides expertise in entrepreneurship, tax and accounting. His practice primarily services family-owned, emerging and high-growth companies. Jeff's focus is helping business owners achieve success through the implementation of profit enhancement, expense reduction, asset protection and business process solutions. Contact him directly via email at jbolton@daszkalbolton.com or by phone at 561.886.5292.
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