We’ve been working with a firm in London this week reducing their running costs by way of improving their processes and an interesting topic came to light during our diligence.
A Bad Business Approach
The director of the ‘shall stay unnamed’ company (we’re confidential!) had reduced his marketing strategy to almost zero per month but could not understand why new customers were not flocking to his eCommerce site. Well, once we briefed him on the importance of not cutting costs in value added services such as marketing and PR because they grow the business (and revenues!) he suddenly wanted to know more. Like most companies, when it comes to cost cutting they instantly reduce their marketing, advertising and offers with the thought process of “It costs money so we need to reduce it”. Cost reduction strategies are all well on good in reducing ‘dead money’ e.g. utilities, wasted resources, costly overheads and processes but they shouldn’t be implemented on business growth avenues.
Think about it. Your electricity bill costs £1200 per month, we help you to reduce it to £900 per month and you save £300 per month – great!
Bad Cost Cutting Example
You spend £4000 per month on advertising and marketing which you halve to £2000 per month, a saving of £2000 per month? No. Its actually cost you £300,000 per year! Why? The £4000 per month was generating you £600,000 of new business per year which you have just halved… make sense? In actual fact you should be considering increasing spend on business growth!
Business Solution Providers!
We don’t halve your costs across every expenditure you have, we look at the big picture; Revenue streams, new business, overheads, etc. We don’t advise you to slash your potential growth; we may suggest a new marketing company that can assist your growth which provides better value for money but we do not impact your bottom line for the worse.