Thursday, September 10, 2009

Reducing Costs in Difficult Times

This article was written by Dennis Wright, Score Orange County Management Counselor

Getting through difficult economic times motivates businesses, both large and small, to seek out ways to reduce costs in an effort to maintain or restore profitability. That often leads to painful choices regarding staff. The resulting actions, however, may create other problems – internal problems – that can lead to further deterioration in top-line results. Then that business finds itself right back where it started, perhaps reaching for another dose of the same medicine.

Looking beyond what appears to be the obvious though, can produce surprising results. What I’m suggesting is that you look beyond those things that may, and often do, effect sales volume; look at costs that are considered “fixed”, such as those associated with your facility, office equipment, machinery, etc. and the leases related to them.

For example, in terms of office space, if you have something to bargain with – such as extending the term of the lease, provided of course that makes sense after considering other factors – you may be able to reduce your present monthly rent by means of an early renewal. This requires market knowledge and research to engineer, and should not be attempted without help from a qualified real estate professional. It’s also a good idea to look closely at how you are using leased space. A right-sizing analysis and a workflow study might lead to reconfiguring your space, which in turn may enable you to create a landlord approved space sharing arrangement with another party who would also share the rent, or give you the ability to sublease a portion of it to another business. Downsizing equipment and entering a new lease with the same vendor may also help trim costs.

There are several reasons these alternatives are often last to be considered, but that’s another matter. The key is to think outside the box and see where that leads. SCORE is here to help you do just that. Consider this: over 100 counselors, most of whom are retired executives or former business owners, all of whom have lived through recessions. In other words a team of people who likely have faced the same situations – the same decisions – you now face who will listen and offer advice that comes from real life experiences.

I’m certainly not saying there is a single “silver bullet” solution just waiting to be discovered, as a matter of fact any solution will likely involve further research and a combination of appropriate well planned and executed actions, but don’t you owe it to yourself and your staff to explore every option before taking the next step? Call us today, at 714 550 7369, for an appointment and let’s see what ideas we can come up with together.