cutting costs without losing key staff

Many companies at the moment are facing cashflow difficulties and having difficulties in raising funding to cover shortfalls in working capital – or toiling to pay the bills.

The biggest single cost for most people is the wage bill.  That’s the troublesome one which comes around every month.  Reducing your wage bill by sacking people is a horrible experience, and it doesn’t get any better if you call it downsizing.  Not only is it traumatic for everyone concerned, you risk losing the staff you’ve trained up, and these are the people who make the money for you, so it can be counterproductive in the long run.

So what else can you do?

These are some of the actions I’ve been suggesting to some of my clients over the last few months:

• Firstly cut all the unnecessary costs you can find in the company.  Can you get a cheaper deal on your telecoms?  Speak to Pete Jenkins about hosted VOIP, renegotiate your mobile phone contracts.  Ditch the company car by using the city car club (mention me and I get 20 quid off my car club bill)  and buying your bus tickets online.
• Can you cut out how much you take out of the company?  Have a look at the Money Diet by Martin Lewis – I paid £3.99 for this and have saved around 5k by doing what he suggests.  If you save money on your personal spending, you can afford to leave more money in the company and still have a good lifestyle.
• Instead of making some staff redundant, ask your staff if they would be willing to take a small pay cut while things are difficult, or move to working a 4 day week.  It helps if you cut your own pay by more than you are asking staff to take. Most people would rather have a temporary pay cut than lose their jobs altogether, and if you need to make substantial savings, staff will probably know that they need to help out.
• Cut your advertising spend. Unless you are 100% certain that your advertising works for you and you get real return on your investment, get rid of it. Note that I say advertising, not marketing – you should be increasing your marketing.  If you are 100% sure that you’re getting more customers through your ad spend (this might be where you can track customers through adwords, or you’ve run a special campaign that you can trace) and you’re making money from those customers, then beg, borrow or steal to increase your spending.

What not to cut out

• Don’t cut out the biscuits at meetings. Apparently, 20% of companies are doing this, which is madness.  If you can’t afford a packet of hobnobs, then you should be giving yourself a P45 and signing on.  Trivial things like this just annoy staff, damage morale and make you look rubbish.
• Low cost, labour intensive marketing. If your staff aren’t busy because you’re doing less business, then get them out at networking meetings to sell for you. I don’t care if they’re the administrator or the cleaner – give them some key messages, and send them out there to be your ambassador and make new friends.  If they’re shy, get them to develop some web links by commenting on blogs in your industry.

This entry was posted on Wednesday, February 25th, 2009 at 4:05 pm and is filed under Uncategorized. You can follow any comments to this entry through the RSS 2.0 feed. You can comment, or trackback from your own site.