By Michelle Wright is founder and CEO of Cause4
Cost management may not sound like the most exciting part of running a company, but it can be unexpectedly rewarding. Most developing businesses, understandably, tend to focus their energies on generating leads and hitting income targets. But to really maximise those profit margins, a thorough costings analysis can be a revelation.
Here at Cause4, we were amazed to discover – after a year of reviewing everything from tax credits to rental spaces – that we were able to reduce costs against turnover by around 7 per cent. Here are a few of our findings from that exercise that could help you make cost efficiency a regular part of your operation.
Involve everyone in the reviewWhen it comes to increasing efficiency, there may be learnings across the company that aren’t visible at management level. By valuing all voices, saving money becomes a team activity instead of an imposition from ‘on high’. Making everyone a stakeholder in the project has the added bonus of potentially throwing up unexpected efficiencies and innovations. Set clear end-goals, share plans and ask for input on where the money saved could be better deployed.
Split costs where you canThere are incentives out there – including VAT relief – for sharing overheads such as back office services, storage and procurement. This is common practice in larger corporations, which will often commission new software or database systems between two sister companies, such as between the broadcast and publishing arms of a media conglomerate.
Don’t cut corners on professionalsLawyers, accountants and auditors have an industry standard. Saving money on these services usually means you will be assigned a junior, rather than the senior partner that you may need.
ContingencyKeep some room for manoeuvre in your costings review if you can. It’s risky to assume your revenue stream will not fluctuate, especially in current economic and political times. Is your business able to function at 25 per cent – or even 40 per cent – below average revenues? If you found yourself in that situation, how would you adapt? This question can reveal the core requirements of your company’s operation very quickly and effectively.
Invest in training and marketingThere’s a temptation with saving initiatives to begin with cutting marketing budgets and training programmes. Both send out alarm bells: one to clients, potential customers and your competitors; the other to staff. If money is really tight, investigate alternate funding; perhaps commercial partnerships with a sponsorship element for marketing or business investment grants for training around national skills gaps.
Investigate development grantsAre there business initiatives in your sector, government bodies or NGOs out there that could help you cover some of your costs in, say, research or personnel? Only this month, the government has announced a grant for small businesses. There are consultancies which can advise on potential funding alternatives and, of course, First Voice is a great resource for keeping on top of the latest help and resource available to help small businesses achieve their ambitions.
Michelle Wright is founder and CEO of Cause4