Death Spiral
21 Aug
Slashing costs so much, you can’t stop the bleeding
Cutting operational costs can be smart, but there’s a fine line between cutting the excess fat from an organization and cutting too far and finding yourself in a Death Spiral.
Seth Godin, renown business author and marketer, recently wrote a great posting on this blog entitled “Death Spiral!” The message was clear that especially in slower times, companies that cut back too much may start to lose momentum, appeal and ultimately customers.
In his article, he references Tom Peters and quotes him as saying “You can’t shrink your way to greatness”. Don’t be the fish-monger in his article who cuts costs and spends less on upkeep to his store and inventory, ultimately lowering his quality and ends up out of business.
While others are cutting back, try re-inventing a part of your business, or expand another part, or spend more to advertise a great line of products that you’ve been able to negotiate a special price on that you can pass along to your customers. Do whatever you have to in order to build on the momentum and the customers you have before it’s too late.
Here are some ways to cut costs courtesy of Microsoft Small Business:
|
Area |
Solution |
| Transportation Costs | Have you analyzed your delivery routes and sales call schedules? Compared fees charged by third party shippers? Scrutinised public transport costs? You may find ways to be more efficient and save money. |
| Cross-Training Employees | Consider the skills and interests of your staff members and develop some “job shadowing” opportunities as time and workloads permit. |
| Comparing Service Offerings | You could consider VoIP (Voice-Over-Internet Protocol), which is basically phone service that uses the Internet. Many businesses are opting for this cheaper alternative. |
| Monitoring Receivables | Offer incentives for customers to pay invoices quickly. Everyone loves getting a deal — and a small discount may well off-set the cost of collection efforts. |
| Marketing Efficiently | If you mail a printed newsletter to customers, would it be more cost-effective to send out an e-mail newsletter? You can save not only printing and paper costs, but also postage |
| Checking Every Angle |
|
Slashing costs so much, you can’t stop the bleeding
Cutting operational costs can be smart, but there’s a fine line between cutting the excess fat from an organization and cutting too far and finding yourself in a Death Spiral.
Seth Godin, renown business author and marketer, recently wrote a great posting on this blog entitled “Death Spiral!” The message was clear that especially in slower times, companies that cut back too much may start to lose momentum, appeal and ultimately customers.
In his article, he references Tom Peters and quotes him as saying “You can’t shrink your way to greatness”. Don’t be the fish-monger in his article who cuts costs and spends less on upkeep to his store and inventory, ultimately lowering his quality and ends up out of business.
While others are cutting back http://members.whattheythink.com/allsearch/articleerc.cfm?id=41280, try re-inventing a part of your business, or expand another part, or spend more to advertise a great line of products that you’ve been able to negotiate a special price on that you can pass along to your customers. Do whatever you have to in order to build on the momentum and the customers you have before it’s too late.
Great article. I recommend that you check it out.
Links:
Seth Godin: http://www.sethgodin.com
Death Spiral: http://sethgodin.typepad.com/seths_blog/2009/07/death-spiral.html
Tom Peters: http://www.tompeters.com
Here are some other good tips:
- Shifting into Cost-Cutting Mode
- Managing: 75 ways to cut costs now!
- How to cut costs without harming your business
Andy Buyting has been in the retail industry since he was six years old. Today, he applies his entrepreneurial know-how to Green Village Home & Garden, one of Canada's most successful specialty garden stores. Green Village Home & Garden is currently expanding into multiple locations throughout eastern Canada.
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It sounds like you’re creating problems yourself by trying to solve this issue instead of looking at why their is a problem in the first place