A wise man once said, “Facilis descensus averno” Translated: the descent to the underworld is easy. Or in other more modern words, it is hard to do the right thing, and extremely easy to do the wrong thing.
Companies in today’s economy have been dealing with a continually shrinking market while simultaneously battling with increasing competition. The end result of this phenomenon has most notably been in the loss of overall gross sales and corresponding profit margin. To address this, many companies have made cuts in jobs, wages, bonuses, profit-sharing plans, advertising budgets, travel, and “non-essential” expenses to lessen their exposure and secure profits. But the companies that do this are making a bad mistake that can have long term negative effects.
No one can argue that the largest traditional expense(s) for any business is either Wages or Cost of Goods Sold (COGS). So the easiest thing to do is to just fire people, give them a reduction in salary and/or benefits, or lessen the quality of the good or service the company produces to offset the lost sales and profits, right?
There are three hard things all business owners can do to accomplish the same goal, while not compromising jobs, morale, integrity, or reputation. But remember, they are much harder to dothan just arbitrary cutting and slashing…
1. Get Your House in Order
Investigate all of your indirect spend, or fixed costs to “mine” for existing profits. Leave no expense unturned. Expense reduction consultants or inter-departmental committees can accomplish this and produce impressive, quantifiable results in a short amount of time.
2. Outsource, Outsource, Outsource
There are an enormous amount of tasks that can be outsourced for a fraction of the cost of a FTE. And with that task being taken care of by a contractor, the FTE can be re-allocated to revenue generating projects. You will lose zero strategic control and essentially have a trained employee that can start immediately.
3. Don’t be Afraid to Raise Prices
If you know you have a great product, a great service, and/or great quality, have the confidence to create an “elite membership” of clients and raise the prices for your goods or services. Don’t be that guy/girl that flinches first, back-peddles, or cowls to a lower quote from a competitor looking to buy the business. Stand your ground and price yourself above your competition. If someone leaves, let them. Studies have shown that more often than not if a company leaves you because of price, they are twice as likely to return to you because of service and/or quality within one year.
So the moral of the story is simple: don’t be lazy, think outside the box, be willing to change, and stand firm. You don’t have to penalize your employees that depend on you in an fragile economy, or cut areas that are directly linked to service. Your employees, customers, and vendors will see your courage in the face of adversity and become even more loyal to you and work harder than they did before as a result of YOUR hard work and decisions.
But then again, it’s a lot easier to just let people go, eliminate customer service, or reduce the quality of your product.
It’s up to you to decide.
Until next time,
Jason Ritchason -President/CEO