When you’re hit with an unexpected crunch—due to a faltering economy, unfavorable trends in your industry or plain old tough competition—your first instinct is probably to conserve cash.
And while that’s a positive instinct, before you make wholesale cuts in spending or radically alter the way you do business each day, remember that certain expenses help you maintain and even improve your competitive position. By cutting these critical expenses, you can end up hurting yourself and, in some instances, even threaten the very survival of your business.
Here is a summary of costs you should be wary of cutting:
Accounting and audit services. In tough times, you must keep on top of your cash—and to do this, you’ll need top-notch financial reports, timely tax filings and solid trend information. That’s what your accountant or auditor will give you.
Advertising. Advertising is your lifeline to sales. It helps keep customers informed about what you have to offer and helps you turn over inventory. Many large corporations, when faced with declining sales or profits, dramatically boost their advertising expenses.
Customer service. What unique courtesies and services do you provide your customers? What can you add when you’re faced with competition for limited customer pounds? Never skimp on relationship building. Decide how you can make your service more personal during hard times and you’ll build a following of loyal customers when you need them most.
Insurance. Insurance protects you from a wide variety of catastrophes, human and natural. Don’t hesitate to examine your coverage needs when things are tight. But don’t slash your coverage indiscriminately; you’ll only reduce valuable protection that could make the difference between the life and death of your business if a major catastrophe occurs.
Intangible benefits. It’s possible that you may be faced with salary or bonus reductions when money is hard to come by. That’s understandable, and perhaps, inevitable. But be wary of cutting relatively low-cost benefits that have high symbolic value for your employees. Days off on employees’ birthdays, inexpensive holiday gifts and staff gatherings, for instance, might be extremely important in maintaining morale during times of trouble.
Marketing. Marketing is not synonymous with advertising. While advertising concerns itself with paid media messages directed toward your constituency, marketing more broadly attempts to help you match existing and new customers to your products. It can include market research, public relations programs, sales promotions and much more. Aggressive marketing might be one of the few ways you’ll attract new customers during hard times.
Meetings. Yes, meetings can be among the most frustrating and unproductive of business activities—especially in-house meetings. But when times are tight, your people need an opportunity to communicate face to face with each other and with you. If they’re planned well, meetings can help maintain an aura of calm, candor and stability—and can give you an opportunity to motivate your employees to help meet the special demands you’re facing.
Physical appearance. You may have to pare your budget when it comes to purchasing property, equipment and vehicles. But don’t slash it. Attractive surroundings can make all the difference in the world to the customer seeking to do business with a solid firm that looks like a winner. When times are tough, this might even be the time to spruce up your surroundings with low-cost amenities and decorations. And don’t forget about the importance of preventive maintenance: Serious reductions on maintenance and improvement costs can end up costing you far more later on.
Training. Unfortunately, managerial and employee development is often among the first expenses to be cut when money is tight. Yet, if you carefully select training programs, seminars, college courses, books and tapes that focus on business growth and productivity, you may find these training resources becoming one of your best survival tools.
When times are tough, you’ll want to cut expenses. And you should. The measure of your business acumen during these difficult times, however, will not be the size of the cuts you make, but the wisdom you employ in making them.
Remember: In uncertain times it is even more important to be seen by your customers and potential new customers – Don’t forget, Out of Site is Out of Mind!