Wednesday, 1 May 2013

Top 7 Innovations to improve efficiency and reduce costs

During a recession all business must do two things to survive, reduce costs and improve efficiency. Unfortunately many businesses tend to grow fat during boom times, leaving them with a large task of cost reduction during lean times. Implementing the culture of lean, allowing staff to take ownership for this is a good way to improve engagement which can be threatened by cost reduction programmes. There are 7 common ways to reduce costs and improve efficiency highlighted below, these are applicable to all sizes of business:

  1. Reduce travel costs - whether it is changing from flights to trains, reducing need for commuting with technology or reducing the number of locations you operate across there is always opportunity to improve this area.
    1. Allowing remote working has two fold benefits, its reduces your costs of equipment as workers use their own computers, it also improves effifiency as home workers tend to work longer, wasting no time on the daily commute.
    2. Changing from flying to rail is a good idea both for environmental reasons, but also cost reasons.
    3. Webcams and conferencing technology is cheap, if you don't have any them you really should get some. You can even get software to share your desktop; Bridgit software is easy to use and can help do remote presentations and enable to track users engagement with it, often the interactivity is easier to assess than a live audience. 
    4. Centralising staff can seem like a good strategy if you are a larger operation, of course doing this may involve redundancy programmes that can be harmful to engagement, doing this well is key.
  2. Reducing hours of your staff, this is a great way to reduce risk of talent drain and keep engagement high. Allowing job shares and the like may facilitate and enable current staff to stay in the organisation, with future possibility of increasing their hours.
  3. Go paperless, this is both environmentally sound and can save on stationary cost, and often ignored expense in business. With emails, shared documents, flash drives and intranets there really is no need for paper in the modern world. Invoicing can be done via email, sales and service can be conducted on tablets and reviews can be interactive using online forms.
  4. Stop emails and Meetings for two weeks. This excercise is a great way to really understand your business. Human nature dictates a desire for interaction, as such companies often get laden with meetings and communications often uneccessary. This technique is used to demonstrate two things. Firstly that you waste a lot of time composing and generating emails which are often ignored or simply repeated verbally later. But also if you have a lot of one to one interactions you will find that more ideas are generated and issues are resolved quicker. This is a huge boost to efficiency and doing this a couple of times a year will help people adopt the techniques and culture longer term.
  5.  Renegotiate with your suppliers; Like personal customers many businesses tend to forget that they are not the only business suffering during a recession. It is the best time to negotiate hard with suppliers for a cheaper deal. Increase your margins by putting contracts out for tender, reducing offers for stock or having your suppliers give you better value for money. You will be surprised with just how much you can save.
  6. Improve sales on your quietest day. No doubt in any business there are trends, cyclical trends of busy and quiet periods. The busy periods often subsidise your quiet ones. A technique to reduce this down time, improve your image and increase the return from your employees is to boost your business on these days. If, for instance, your business has a slow day on a Tuesday, why not introduce Crazy Tuesday where you offers services or products at really small margins. You may find this can even out your workload but it will also attract new business. Doing this on a limited scale, for instance first 12 customers on Tuesday, or first 8 slots on a Tuesday will get 40% discount will be a great incentive and boost income. Many businesses are afraid it won't increase overall trade just simply reduce the margins on that particular day, but remember your not making money on that day anyways so there is no loss involved only gain!
  7. Innovate. This cannot be stressed enough, in order to stay alive in business you need to forget failure, stop negativity and roll with the punches. Expand your offering, try new things, improve your processes and grow. Recession is a great time to expand your offering, because prices are low and competition is literally dying out. Cornering the market in a recession is how big business see triple figure growth in tough times. Research the areas that are perhaps in growth, low cost essentials, or high end luxuries are both areas of growth because most people want more for their money and rich people are getting richer. An example of this would be: A Gardner experiences a loss of 30% customers due to cutting back of household expenses. To differentiate himself and win a larger market share he introduces teaching to his role. Approaching local school he runs an after school club one night a week open to parents and pupils using some of the school grounds to plant seeds and gain interest from the local kids. This is a great idea and he also offers packages of started kits to would be home growers. Without making direct income from the after school club he increases his market share by attracting new customers, he also innovates by selling packs to start ups. Bought from local garden centre with small mark up he is also supporting other local business.

Having had experience of Resource Planning for the fifth largest financial institution in the world and also owning three small busineses I have experience cost cutting and efficiency at both ends of the spectrum, remarkably the principles remain the same. Do not fear tough times, use them to redefine your approach and if you successfully negotiate the recession you will find your growth will be exponential during periods of boom.

Feel free to leave comments and ask questions if you like.

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