How far do you still need to cut costs in your small business?

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MalgasOne of the country’s best columnist passed away earlier this year. Sometimes he claimed that an albatross had flown to his windowsill to give him tidbits of juicy information that others were reluctant or feared to disclose. I occasionally get information passed on to me but not from that graceful seabird the albatross. Perhaps because I grew up in Kalk Bay I get scraps of information from a Malgas (Gannett). I don’t know how reliable they are but they are always interesting… stuff no one really wants to talk about openly.

Anyway a Malgas flew into my inbox the other day with a small business owner complaining about large institutions who are spending money like there’s no tomorrow. They don’t seem to have a clue about cost-cutting, the owner said. You know these institutions that employ so many people that they are virtually falling out of the windows of the opulent buildings where they “work”. Criminal charges, misconduct, disciplinary hearings, suspensions that last for months and even years.

Do small businesses have anything in common with these big spenders? Do small businesses need to worry about having too much unnecessary fat in their businesses? Do they need to clean up and cut expenses?

My feeling is that small business owners generally run pretty tight ships. Competition is tough, costs of fuel, rent and labour are skyrocketing. If they don’t watch costs with a hawk’s eye, they will quickl face bankruptcy. But unnecessary costs can sneak up on you like a thief in the night, stealing your money without you realising what’s really happening.

Small business owners need to watch out for those smaller costs that mount and begin to hurt their business. Think of smaller costs such as stationery, consumables and raw materials or ingredients. How many of your staff are walking out with your stationery to use for school and home projects? How often is your photo copier being used for recipes, domestic record-keeping, insurance documents and art projects for the kids?

One small business owner refused to own or lease a photo copier and instead got staff to use the copy shop down the road. The purchase price per sheet might be higher but if you add all the costs of ownership, you’ll quickly realise how much money you could be pouring down the drain.

In this tough business environment the giant business organisations are taking costs seriously. BusinessWeek reports that a brewer has informed executives that they will no longer get free cases of of beer; a food manufacturer told its executives to turn in their mini-fridges and one burger chain has cut its company headcount from over 38,002 something like 2,400.

Whether you own a profit-driven or purpose-driven small business, cost control will keep you out of trouble. Forget the institutions out of control – stay focused on what you can do to keep costs cancer gobbling your profits.

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