JUNE 2007: BUSINESS TOOLS, COST-SAVING STRATEGIES
10 (good) ways to cut corners
Tim Hickey, principal at Tim Hickey Consulting Associates in
Vancouver, Wash., has some pretty sound advice when it comes to
cost cutting.
Don’t think first about what you can cut out, he says,
but what you can improve in terms of your processes and
operations. Don’t make cuts that reduce your revenues
and, no matter what, don’t start sizing up your business
like it’s a Thanksgiving turkey.
“Too often companies come in and just sort of think,
‘What can we carve out?’” says Hickey.
“If you do that, you’re putting yourself at risk of
death by a thousand cuts.”
Chris Adamek is practice director at ACME Business Consulting
LLC in Portland. His best advice on cutting costs?
“There’s a certain amount of that that just comes
from being more efficient,” he says. “Sometimes
you’re not able to tie a specific dollar amount to it,
but it still makes a difference.”
In sum, to realize some cost savings in your business,
don’t cut just to cut. Identify and then tackle
inefficiencies and consider the following tips for running a
tighter ship.
1. Invest in a marketing
plan. Hickey is no fan of having talented, highly paid
sales people spinning their wheels trying to find good sales
leads. Instead, he suggests investing in a high-quality,
focused marketing program. “Companies that cut marketing
end up paying more for expensive leads,” he says.
2. Look for outsourcing
opportunities. People see the word
“outsourcing” and immediately think of a call
center moving to India. But, says Adamek, there is much more to
it than that. “Every function of a business can be
outsourced,” he says, listing as examples payroll,
marketing or creative services. “It’s just a
question of what’s strategic to you and what
isn’t.”
3. Eliminate one-off projects
or operations. One-time customer projects rarely make
sense for a company that doesn’t consider itself a custom
shop. That doesn’t mean a firm shouldn’t consider
new markets, but it does mean a company should have a clear
definition of the services it provides and the products it
offers.
4. Annually review software
and other contracts. It’s not un-common for
businesses to lack expertise when it comes to negotiating
contracts with software vendors or to be paying for services
they don’t need. Keep these costs down by reviewing such
contracts annually to make sure you’re paying a good
price for truly necessary systems.
5. Make regular technology
upgrades. Still using Excel spreadsheets to manage
important sales figures or inventory numbers? Adamek says many
companies could benefit by upgrading to a more sophisticated
system — something that can usually be started
in-house.
6. Don’t start
unsupported initiatives. Time and again, Hickey has seen
companies haphazardly and half-heartedly start an initiative,
only to abandon it with little to show for their efforts.
“Too many companies will see any old opportunity and just
throw something at it,” he says. “That’s a
waste of money.”
7. Consider direct sources
— or not. Many companies benefit by having direct
source contracts with suppliers for their raw materials. For
those that do, Adamek suggests reviewing those contracts every
year to make sure they still make financial sense. Companies
that use third-party sources would be wise to at least consider
direct sources as an option. “There can be some real
opportunity for cost savings there when they hit a certain size
and scale,” he says.
8. Implement a strategic
plan. Without a unified strategic plan, the management
team isn’t able to focus and can slip into a chase for
what Adamek calls “micro-opportunities.” The
result? Loss of both cost savings and efficiency.
9. Streamline
processes. “Make sure your processes are what you
really need to get the job done in the best way,” Hickey
says. And make sure everyone is focused on improving those
processes every day. “This can hugely reduce
costs,” he says.
10. Link compensation to
cost-cutting goals. “If you’re going to
build cost savings and efficiencies as a core tenent of your
business,” Adamek says, “make sure it’s fully
integrated into performance assessments.” That means
finding creative ways to encourage — and reward —
cost savings achieved throughout a company.
— Jon Bell
Have an opinion? E-mail feedback@oregonbusiness.com
