New businesses open all the time, but it is very tricky for most to celebrate their first birthday. This is because business owners fail to maximize profits for sustained growth and success.
One of the most testing components of success for business owners, regardless of size, is the ability to keep the cost of doing business very low. And given the current global surge in oil prices and rising inflation, everybody needs proper cost cutting approaches.
Quite a number of entrepreneurs and observers blame business failure on policies imposed by authorities. Even when it is poor management, governments have been put on the defensive to explain why tax policies, inflation, interest rates, exchange rates are the way they are.
It is very clear that general macroeconomic variables (inflation, interest rates, exchange rates etc) have significant impact on business, but what about the microeconomic ones (management, individual decisions etc)?
And even though some businesses people have managed to generate much in sales, they have sometimes failed to generate bottom-line profit which provides opportunities for future growth and expansion.
While it is very true that macroeconomic variables have a significant impact on business performance and growth, it is also true that some of them can be controlled and avoided by the business entity.
Do all expenses you are incurring contribute to the value of your business? What if you do away with some of them, what impact would it have? Ask questions.
What you ought to do as a manger, is to concentrate on variable costs since fixed costs are by definition harder to change.
It is advisable that you cut down on fluctuating costs since fixed costs like the rent and utilities will be recovered in the long run.
But don’t cut costs just to support a faltering business and then forget all about it once short-term objectives are met. Look at the impact it is likely to cause by revising your finances.
Business writer Michelle Collins calls it “cutting costs without cutting corners.”