With many companies experiencing a decrease in business, owners are looking for ways to decrease their expenditures.
“It’s important for companies to look at where they are now, not where they were a year ago,” says Sam Agresti, director at Brady Ware & Co. “Businesses need to examine every aspect of their operation and make adjustments in light of the pandemic.”
Smart Business spoke with Agresti about what to consider to survive in the midst of ever-changing conditions.
What environment are businesses currently facing?
Companies are facing are two very different situations. Many have lost revenue and are struggling. They have fixed overhead costs, but their volumes are down. And their employee counts are too high for their current situation.
Others have pivoted and are bringing in more revenue than they were previously. They’ve learned to be more efficient in their systems, their technology and their human capital.
In both situations they are at a fork in the road and must consider all of the metrics of their operations. When things are going well, it’s easy to increase spending without much thought.
Look at revenue per employee. How has that changed? Evaluate fixed costs such as rent and utilities. Do you need as much space?
You may not be able to change these things in the short term but they should be on your radar for the long term.
Then evaluate variable costs. Review contracts to determine if you may not need those products or services any more. And if you do, renegotiate those contracts where you are able.
Some companies are taking a central spending only policy, going through their expense structure to determine what is essential. For example, a business may have been considering an upgrade to its IT systems but now is pushing that off in favor of maintenance.
Organizations need to realign to adjust for how things have changed and optimize those things they can impact. Look outside your traditional products and services at different ways to make money. That may mean pivoting and exploring opportunities in new markets or diversifying.
How can an outside adviser help a business assess where it can right-size?
An adviser can help analyze a company analyze where it actually is today, vs. where it may still see itself from a year ago. That can be difficult for an insider who has been there for years to see clearly.
This is not the not the time to be shooting from hip. An adviser can help you be intentional about what you are doing and use data to make projections and benchmark expenses. That person can help you see opportunities you may not have considered and identify all possible outcomes.
A professional can also help identify business that is unprofitable. If it is not profitable, there may be a strategic reason to keep it, such as spreading overhead. But if a company is just trading dollars to keep people busy, it may be time to drop that account.
How does right-sizing impact a business’s culture?
A lot of bad cultures have been exposed during the pandemic. And if you’ve made personnel cuts, the people who are left may think the company is in trouble and jump ship. Be transparent and communicate daily with employees about where the company stands and what that means for them.
It’s critical to take a fresh look at your business, where the money is coming in — and where it may be unnecessarily going out. Make adjustments to the financials, to banking, to expenses and to employee structure to get to the right size for where you are now.
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