In these challenging economic times, entrepreneurs are forced to carefully scrutinize all expenditures. To stay ahead of the business curve, cutting costs and operating my business as lean as possible are urgent and extremely important areas of focus for me.
After 17 years in business, I returned from maternity leave to the news that three of my company’s large national accounts have decided not to renew their contracts. They reported that, while we provided superb service, the economic crisis they were facing required drastic measures. Before I knew it, our overhead devoured our profit at an alarming rate and we found ourselves operating in the red.
Thankfully, I was able to get back in black, but it wasn’t easy. Here are the steps I took to ensure my business stayed afloat:
Examine My Spending
I began the recovery process by examining how we spend (possibly waste) money within my organization. I did this by requesting an accounts payable report from my accounting department. This is a seemingly obvious first step that should be done in any economy, but how many of us ever really examine who we pay and how much?
Create a List
After examining my spending, I generated a list of questions about my vendors and learned where I could save. Afterward, I made ruthless cuts and restricted spending. I notified all managers that there would be a freeze on all non-essential spending and instituted an approval process for spending over a certain dollar amount. We then laid off all non-essential staff, notified all employees of a freeze on pay increases and changed the employees’ monthly rewards program.
Bring in the Experts
The third step was to call in the professionals. I went to my Forum for help with the big-ticket items. After all, these are like-minded business owners with a whole host of expertise! Like many companies, communications was a relatively large expenditure for us. Thankfully, one of my peers offered to audit our communications spending. Within a week I received a detailed checklist of the changes I needed to make to save money.
Renegotiate Contracts
The fourth and final step was to renegotiate current contracts and look for discounts with our existing commercial vendors. I systematically went through our entire vendor list and simply asked for a better rate. Many offered to cut our costs in half in lieu of losing our business. And, I learned of some other cost-saving incentives. For example, we now get a five-percent discount off our Federal Express charges simply by paying them on our corporate American Express card.
In three months we were able to go from US$20,000 in the hole back to profitability. With the financial house now in order, we are able to focus on our sales efforts. This focus has resulted in the strongest sales pipeline we've had in years!
This financial review of my business proved wholly successful. My only question is … what took me so long? Thanks to the support of my team and Forum, I’ve been able to survive this rocky patch and focus on the future of my business.