Controlling your costs the professional way

Many of us who have worked for large companies have experienced "this quarter looks bad" followed by a knee jerk reaction to costs. "Make sure you turn out the lights every night" was an order I received at Mercury Communications after some poor results. The problem was that the potential saving was trivial, so it smacked of desperation. Staff were very cynical and one of my team was responsible for a spoof story in the London Evening Standard reporting we had been ordered to bring in candles! And that's the problem, knee jerk and petty cost cutting achieves little, while alienating staff.

Instead, it's necessary to create a culture of sensible cost consciousness. I've always told my business that we have enough money to do the things we need to, but we don't have enough to waste. I've learnt to put people with a cost conscious mentality in charge of spending on the small things. That way, we are always careful with the cash. It's important to be consistent, and try to avoid the feast and famine syndrome. Cost savings are best achieved with continuous gentle downwards pressure coupled with projects designed to achieve major gains.

Staff salaries are another important area. No one wants to underpay staff, but they often represent the biggest cost area of the business and there are some ways to keep salaries under control.

  • First, regularly recruit great people with less or limited experience. Inexperienced people are cheaper, and usually more hungry. Over time they will easily out-perform average people with greater experience, while saving the pennies.
  • Don't pay salaries at the top of the scale, but instead ensure that you have good conditions and you treat people like adults. When employees enjoy working for your company, they will want to stay. In my experience, some of the keys to this are making sure you communicate plans and issues regularly across the business and listen carefully and continually.

Try to say yes to all special requests like emergency time off, salary advances etc. Act ethically towards customers and staff and speak to them as equals. In other words, use every little opportunity to establish goodwill. Too many employers fear they will be taken advantage of, but that's not been my experience at all.

Nothing here is revolutionary, but my experience is that these are some tips that really work. It was only a few weeks ago that a corporate finance specialist was telling me how surprised he was by our low costs. I was pleased, but I can never afford to be complacent.

Chris Barling, is CEO of E-Commerce software supplier, Sellerdeck. Originally published on Business Matters.

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