Cut costs to the bone

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Axe (Photo credit: coconinoco)

By now if you haven’t cut costs in your small business, it’s about time you do so. Would-be start-up owners need to plan their business using a low-cost model. Small businesses with a lower cost base stand a better chance of survival in this recession.

Cost cutting can start anywhere. I know of one business woman who looked at her inventory and realised that she didn’t know exactly how much stock she was losing. Stock was disappearing through untrustworthy staff. So she implemented daily stock taking. This soon gave her far better control and awareness of just how much she had lost. She could put in preventative measures.

Another area to watch is customers pilfering products from your shelves. Close monitoring and surveillance will help you reduce customer theft. Be wary of customers who walk off from the street and spend too much time “browsing” or “just looking” in your store.

Some business owners I know have already shifted their mindset and are operating lean. One business owner had to buy a car to get to work so he went on to Gumtree and bought a cheap, small car online. Sure, he had a look at the car before he bought but essentially the car was an online classified purchase. Now his fuel bill is also lower and maintenance is cheaper.

If you can’t get your landlord to lower your rental, think deep and hard about whether you need to stay in your present location. When that doesn’t work, consider reducing your floor space or getting a smaller shop. One small business owner took his shop outside of a high-traffic shopping centre and now trades from a house in a suburb. But he could do this because he had built up a big customer list. His customers are only too happy not to have to trek to a shopping centre where they get chiseled for parking.

Cost-cutting can go much deeper and lead to a completely different business model. One restaurant owner revised his entire business, reduced staff from 55 to 14, does meal preparation himself, collects his produce and groceries himself and takes most of his bookings online. He only trades for dinner, cutting out unprofitable lunches.

Provocation is an important lateral thinking technique. It doesn’t always produce good or relevant ideas but when you do get ideas they are likely to be fresh and original. You might make a deliberately stupid comment relating to cost-cutting such as watch “We don’t need to carry any stock”. Suspend judgement and use the statement as the starting point for generating ideas. Through this kind of thinking one small business owner now has an inventory-less business.

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