While most entrepreneurs think that the number one way to increase profitability is by increasing sales, this could not be further from the truth. In over two decades of being a business owner and coaching other CEOs, I have seen that in 80% or more of cases, cost cutting is by far the easiest and most effective way of increasing profits. Of course, there are always exceptions. But in most cases, step one is to cut costs and increase efficiency before you move to step two of focusing on increasing revenue.
The easiest way of explaining this is to understand simply that an inefficient company that grows will only grow in the same inefficient manner in which it is currently operating, and it will most certainly become even less efficient. But a company that becomes efficient first by cutting costs and implementing systems will be much more likely to uphold those efficiencies in the growth path. Here are five secrets to massively increasing efficiency within your company.
Secret #1: Fewer Employees.
If you believe that some of the smartest business minds in the world are high level executives and CEOs of Fortune 500 companies, then take a lesson from what they do almost every time their companies are either in trouble or the economy and industry are placing outside pressures on them. The first step is to eliminate unnecessary people. While this is an extremely tough thing to do because it involves human beings and makes most business owners feel like they are going to lose critical aspects of their business, you can most often cut individuals and actually improve the quality of your product or service by focusing your efforts on fewer employees.
Secret #2: More Accountability.
In all of my years of coaching businesspeople and executives, I have learned that the most difficult thing for the majority of individuals to do is to hold their employees accountable. This is especially true if you have a large number of employees to manage. Now that you have followed Secret #1 and eliminated the unnecessary individuals within your company, it’s time to massively increase the accountability for the people who still remain. This means better delegation, more documentation of tasks and responsibilities, and most importantly, tracking key performance indicators.
Secret #3: If You Have Something to Sell, Sell it!
In almost every company that I have gone into as a coach or turnaround expert, I have found equipment, products, or services that were at one point developed or purchased, but are not being put to use in the sales process on a daily basis. Many doctors for example purchase fancy, new lasers and other equipment that they think will massively increase their sales. But they forget to train their staff to upsell this service to customers, so the expensive equipment just sits.
This is also seen in companies that carry inventory. As items become stale and lose excitement, they fail to promote that product and make it front and center, which further decreases sales. If you have ever developed a service, purchased a product, a piece of equipment, or anything else that was designed to increase your sales, then it is your duty to focus on selling it on a daily basis.
Secret #4: If You Pay for a Service, Then Use It.
Today with so many things being online and so many monthly transactions going on our credit cards, we often sign up for services that we think are going to take our business to another level. But we soon forget about them, even though we continue to pay for them. If you have a service that you purchased or signed up for whatever reason, you must ensure that you are actively using it or immediately cancelling it.
If you have a list of services that you are not using today but you “plan on” using them next month, then I suggest you cancel them now and sign up for them again in a month. I can almost guarantee you that most of the services you cancelled will never make their way back into your business. Either use it or cancel it, but there is no waiting until next month.
Secret #5: Develop a KPI Dashboard.
Key performance indicators (KPIs) are the key to management and running a business. Every aspect of your business must have KPIs. The first place to start is to select three to five overall KPIs for your company as a whole. These should be simple numbers that can quickly tell you how the company is doing in a given day, week, or month. Keep them simple and broad so you can see how your company is doing at a glance. Additionally, every employee within your company must have KPIs. By far the best way to manage people is to manage them by the numbers, instead of subjective things. Building KPIs is difficult at first because it requires a lot of effort and thinking. However, make a plan to create one new KPI each day if that’s what it is going to take for you to have all of your KPIs developed within your company.
By applying the five secrets outlined above, you can quickly and easily increase efficiency, cut costs, and improve the quality of your products and services within your company. Focus on this aspect of your business and watch your company flourish.
About The Author:
Arman Sadeghi is the Author of The Business Bible and a keynote speaker. He is a serial entrepreneur who has started over a dozen businesses and specializes in business coaching and helping business executives with peak performance. www.titaniumsuccess.com
The post Five Secrets to Massive Cost Cutting in Your Small Business appeared first on Succeed As Your Own Boss.