Confessions of a Serial Cost Cutter

How many times have you seen friends, neighbors or family try and start a business and fail? What did their initial task list look like? Acquired an office, computer, a new car or van, furniture, etc. What do these types of items have in common? They are fixed costs with very little productive value. A drain on precious capital. Early in my career, I went to work for a struggling steel mill. Back in those days the steel industry was battling with foreign competition , recession and high labor costs. A situation not too different from the plight our airlines find themselves in now. The government in its effort to shore up its basic industries provided this mill with loan guarantees to rebuild its capital structure, but did not allow for the working capital to weather the rebuilding process. The effort was a failure.

How do you approach your fixed costs? Are they out ahead of your business? Do you know how much revenue has to come through your door each morning when you unlock it to pay for turning that key?

I have received many offers from various consultants to help me lower and control my costs. Here are a few tips you can apply yourself.

1. Forget hiring the cost control consultant. Your money ahead already, and besides, you already know more about your business than the consultant ever will.
2. Do you know what the five to ten largest expenditures your company makes are each year? Find out and go to work on them. Negotiate with your vendors or shop them around. The savings will come fast.
3. We all want to be liked, but labor costs will be one of our largest expenses. Keep it fair, but keep it under control.
4. Do you want to be the best performer in your market? Always ready to win the wars of competition? Then work at being the lowest cost producer or provider.
5. Don't forget, quality and service always matter. Finding a new customer always cost more than keeping an existing one.
6. Talk to your friends, vendors, customers and employees. The best prices, services or products are not going to just find you.
7. Know how that purchase is going to make money before you buy it.
8. Learn how to say no.
9. Only use debt for the most productive of investments. Leveraging always has it time and place, but it can rob you of flexibility and future opportunity.

There are hundreds of little ways to reach your end on maximizing your bottom line. Let your fixed costs lag your growth. Remember to apply these principles to both your personal, as well as, your business financial situation. The First has a direct impact on the decisions you make in the second.