Last month Ray Henderson looked at tips for making money when times are tough. This month he examines how businesses can cut costs.
The best professional financial advisers around the world provide many insights into how to improve the efficiency and profitability of their practices.
Even though the worst of the GFC is now behind us, we should always be thinking about what we’re doing, how we’re doing it, and whether we can do it better. Over the past couple of years, as many businesses were doing it tough, we constantly asked: “What are some changes you have made to survive and thrive in difficult times?”
Last month, we listed six ideas to make money in difficult times (refer to last month’s Professional Planner magazine for details).
Here are six simple ideas to save money (or increase efficiency) for your interest and consideration. Maybe one or more of these is something you should consider in your practice too?
Staff
Employment costs are usually our biggest expenses – but don’t be tempted to immediately reduce numbers (good people are always hard to find). A good first question to ask yourself is, “Are my staff fully occupied and effective in the role(s) they have?” If the answer to this question is “no”, here are a couple of thoughts.
Would a four-day working week or nine-day fortnight work for you and some of them? This could translate into a 10-20 per cent saving but should only be considered if there is spare capacity in the practice and client service standards can be maintained.
If you have a staff bonus or incentive scheme, could it be modified to provide non-cash benefits like additional days off or peer recognition instead?
If you do have poor or underperforming staff, take appropriate action to correct this ASAP. Failure to do so is not only expensive but could affect morale as well.
Renegotiate your current financial arrangements
Are lower interest rates or better terms available with your current bank? Sometimes we don’t know until we ask the question! There has probably never been a better time to do this, as bank competition heats up – they need you as much as you need them!
What about leases? Office, car and equipment. For example, negotiating your office lease ahead of time might be a big plus for your landlord as well as your business. Landlords need some certainty about their clients as well and may be prepared to negotiate to keep you for the longer term.
Don’t forget about other service providers such as IT and compliance.
Hold more appointments in your office (If you’re not doing them there already!)
Australian practices that conduct more than 90 per cent of appointments in their offices are 124 per cent more profitable than those who conduct less than 50 per cent of appointments in their offices (Business Health Future Ready 1V). It not only saves time and money but clients appreciate it as they meet other members of the team and take comfort in the fact that they are dealing with a business, not just an individual.
Where this isn’t possible, consider using various forms of new technology (video conferencing, Skype et cetera) for some meetings.
Are you using your office space efficiently?
We see many practices where space is underused. If this applies to you, maybe a portion of it could be sublet to a colleague or alliance partner?
Perhaps you could consider sharing with a like-minded business associate to allow you to share some overhead costs?
Should you consider archiving old files which take up valuable space?
Cut out unprofitable services
The first step is to work out what it costs you to deliver the services you offer. If you know (even approximately) what various services cost, you will be in a position to determine what is profitable and what is not. You may need some help to do this but it will be worth the effort.
We have all heard about the Pareto Principle. Do you know what percentage of revenue/profit is generated by the top 20 per cent of your client base? What about the bottom 80 per cent? This is a good simple first step in the process to determine what services you should, or can afford, to offer.
Embrace technology
Invest in up-skilling your staff in IT. Learn how to optimise software to increase efficiency.
Consider using e-mail instead of printed letters and documents. From our CATScan client survey database, the vast majority have access to email and are happy for you to communicate with them in this way as long as the communication is personalised and of interest to them.
These are another six simple ideas that some have used to increase activity, revenue and profit.
Ray Henderson is a partner and director of Business Health – www.businesshealth.com.au
