In the final segment of our series on strategies for recession-proofing your business, we remind you to reach out to others for advice, including your suppliers (and your competitors!). This week we'll suggest you ask for help, look for alternatives to capital spending, streamline your processes, innovate and use your dollar saving for growth, and implementing cost-cutting tools.
Secret #6. Ask Your Suppliers For Advice
Your suppliers are very likely an untapped resource full of valuable business advice. So go seek them out. Many will happily brainstorm with you on how you might stimulate demand for your product or service. And some will have cost-cutting ideas too.
Building good supplier relationships will pay off in bad and good economic times.
Of course a positive relationship is a two-way street. To be in good standing with your suppliers, you should ensure you pay your bills on time and communicate your order expectations clearly.
Secret #7. Look for Alternatives to Capital Spending
To state the obvious, a sharp downturn is a risky time to buy a piece of expensive capital equipment. Although suppliers might tempt you in an attempt to prop up their own flagging businesses, it is often more prudent to delay future growth plans and defer these larger expenditures until you are more certain of your own financial forecasts.
After all, the key is to use the downturn to "tune up" your own business by getting lean.
Hardware and Operating Equipment
So instead of expensive CapEx items, look for affordable leases where you must. Seek out businesses who own the capital assets you want. They may jump at the opportunity to lease their equipment at attractive rates rather than have it sit idle.
Software and Licenses
Instead of pricey perpetual software licenses, look for Software-as-a-Service (SaaS) offerings. SaaS providers own the licenses, already acquiring the hardware infrastructure needed to run these applications, and are able to spread these costs out over a larger user base. Chances are that if you're looking at a $100,000 enterprise application, there's a SaaS provider with an equivalent offering that you could get for as little at $10,000 a year. If you're looking at a $5,000 CRM small business license, there are SaaS offerings that start as little as $10/month per employee. If you only have 10 employees that need the system, that's a 76% savings!
Secret #8. Streamline Your Processes
Surprise, it's not internet surfing or water-cooler chit-chat that waste company time and money, but the complex processes and sign-offs that require committee decisions and slow down even the simplest of tasks. Consider this quote from the recently unclassified OSS Simple Sabotage Field Manual for general interference with organizations and production:
"When possible, refer all matters to committees, for 'further study and consideration'. Attempt to make the committees as large as possible - never less than five."
The most cost effective way to run your business is to create a concise decision making process, with as few avenues as possible.
A good question to ask when evaluating your current processes is: "how often does this oversight step result in corrective action?" If the answer is never, the process is effectively a rubber-stamp and a waste of time. So eliminate it. You can carry this logical argument too far and begin to encourage undisciplined behavior, so use common sense to guide your review.
Secret #9. Innovate and Use Your Savings to Fuel Growth
The best companies continue to innovate during a recession. They know individuals and businesses have to buy goods and services even in tough times, so there's still a market out there. Reaching it may require a change in tactics however.
In a recession, generally, people are looking for a product that is better, more cost effective, and even smarter. Innovation is the path to serving those needs. You can apply the innovation principle to product development and service delivery, but also to your marketing and sales tactics. A common turn-of-phrase we hear during downturns is: "We used to sell on value-add, but now we sell on saving money." Take the time to adapt your message to your customer's shifting focus on the economy.
Leading companies find a way to take market share during a downturn. So take care to invest some of the savings generated through your cost-cutting measures to launch new products and services, and to reach new markets. You may find you catch your competition completely by surprise.
Secret #10. Implement a Cost-Cutting Tool Like e-Procurement
The first nine secrets all involved modifying your day-to-day business processes. But how will you do that? Send a memo or an email? You may find using an electronic system, one that can enforce your new policies, is the best way to rapidly cut costs and make the changes "stick." A tool like an e-Procurement system can really help, as you can use it to make progress on all nine previous "Secrets." You can:
- Easily monitor spending according to the rules you set up
- Automatically enforce budgets to the limits you define
- Curb non-essential spending
- Better manage inventory, using the system to track what you've ordered, what you've used, and what you have left
- Negotiate better prices from your suppliers based on detailed spending reports
- Engage suppliers in collaborative dialogue while communicating with them better
- Isolate and reject large capital spending requests, moving the organization towards more capital-efficient vehicles for business investment
- Streamline approval processes to reduce overhead costs
- Boost efficiency of employees at every level of your company so they can be more creative and innovate
Implementing a cost cutting tool like e-Procurement can allow you to more rapidly improve your business processes. Then you'll be in a better position to grow your business as growth returns. A recent study by the Aberdeen Group found that the simple act of introducing and using e-Procurement saves an average organization 5% on their purchases. And with a nasty recession in progress and inflation rearing its head, a 5% reduction in operating expenses is a good start.
Have a Great Week!
Jerry
|
