Amazing as it seems, even the most astute CEO may have a blind eye when it comes to unnecessary expenditures. The status quo can have a tranquilizing effect on leaders; it takes a different kind of mindset to look at around your office with new eyes. Have a look at these three areas and see if you don’t add back some expenses immediately.
Who is earning what?
Yes, small business controllers are earning 80k today, when 100k was in many an offer letter just five years ago. Your managers are working longer hours for less dollars. Your service-providers, technicians, and income producers of every kind work evenings and weekends for lower pay than their 40-hour week alone generated just a few years ago. But what about your support staff, your part time employees, and your hourly help?
Many cash-strapped business owners see and understand the need to cut top-level income for their professional-level employees, while overlooking one of the biggest drains on profits: a bloated administrative payroll that has increased, not decreased. Between top hourly rates for long-time administrative help, added overtime for many hourly employees and support staff of all kinds, are you watching the payroll numbers where they really need to be watched?
Don’t just look at your total salary numbers; dissect them. Look at each “department” or each “person” when you are trying to manage costs. Can you eliminate positions, out-source tasks, combine jobs, or delete processes? Be sure to take care of the employees who deliver the income to your firm, and make sure that the salary pool is properly weighted.
Eliminate some customer service!
Recently this writer wrote the wrong “ship-to” address on an order from Amazon. The package sat unopened at the wrong location and the “coffee” was not delivered to its intended recipient. When told of the error, Amazon reshipped the order without question and did not even request that the mis-shipment be returned. What is the moral of this story? Don’t waste a lot of labor time on something that isn’t worth the expense.
If a credit to a customer’s account will make the customer happier and take less time, perhaps its time to evaluate what your manpower is “manning.” Ever have a complaint at a Ritz-Carlton hotel? The front desk manager is empowered to give a credit on the spot. No letters, no fighting, no leaving with a bad taste in your mouth. If it takes your customer an hour to register their unhappiness, your employees an hour to unravel the problem, and then the customer has to wrap up a returning product, just so it can sit on your floor awaiting someone else to do a fix or a swap, what is another way to tackle this problem? Think outside the box a bit and maybe your time-honored customer service needs revamping. Time is money!
Stop coddling your customers!
Remember the whining teen years—everyone else has it better than I do; everyone else is allowed to go there, do that, have that? Well if your customers are allowed to act like teenagers, you should reread those parenting books. Set guidelines and formulas, and package your deliverables. If every sale is a new discovery or every collection has its own rules, you’ll need an employee for every few customers, just to meet all those custom needs.
The stricter you are and the more standardized and packaged your offerings appear, the less bickering you will have. And each customer will know exactly where they stand as far as what they are buying and what and when they are paying. When was the last time you were able to get the president of GM on the phone to demand a custom color and insist you drive the car for three months before you pay for it?
The lessons here? When it comes to cutting costs and running a leaner operation, everything and anything is a target. If you want to keep more profit, you need to look where you haven’t looked before. Streamlining is a moving obstacle. See old ways as just examples to use to come up with new ways.
“Sign” by stock.exchange member Constantin Jurcut.
Patricia Sigmon is founder and president of LPS Consulting , a 30-year-old technology firm that specializes in creating technology solutions for small to midsize businesses, with profit generation and return on investment as the focus. Sigmon also provides profit-generation advice in her boutique, profit-centric firm, David Advisory Group. A successful entrepreneur, a sought-after speaker, and one of our leading experts in the field of profit management, she is author of Six Steps to Creating Profit: A Guide for Small and Mid-sized Service-Based Businesses (Wiley).