Top tips: 18 cost cutting ideas

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Business Link
on 11 September, 2008
in Finance and Strategy & Operations
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If cash-flow is an issue, or you are just looking for ways to cut costs to boost profitability, here’s our collection of money saving ideas.

We’re really keen to hear your views, so if you have your own cost-cutting tip please share it with our readers. You can comment directly on this article or email us.

Also check out last month’s tips to help you frame the right mindset for cost-cutting.

Master your finances
An in-depth, up-to-date awareness of your financial position is crucial. Use financial tools to help you keep track. If your finger is firmly on the financial pulse you’ll be more able to identify cost rises (such as rising energy costs, interest or currency rates) and react to them quickly.

Make every penny count
It’s easy to get wrapped up in the big costs and forget about the little ones. Go through every budget line-by-line, examining each individual cost. For each, identify waste and areas where costs can be trimmed.

Set goals
Once you’ve identified areas for potential cost savings, set reduction targets. Be ambitious but also be realistic, so you don’t impact the quality and effectiveness of your operations.

Consult your employees
Every employee - from top to bottom - has their own area of expertise. Ask them to look within their world and identify where money is wasted and how costs could be cut. (Make sure your cost-cutting moves are seen as positive steps to avoid waste rather than desperate attempts to raise cash.)

Pick your battles
The adage goes that 80 per cent of your sales come from 20 per cent of your customers. Identify high-value customers and make it your priority keep them loyal. Cut costs by exhausting less resources on your least valuable customers.

Shop around
Suppliers - from gas companies to professional services firms - might be reducing prices to boost sales, so shop around to find the best value. Your current suppliers might also be open to price negotiations to retain your loyal custom. (Read about negotiation).

Save energy
Calculate your carbon footprint and work out ways to cut it (which could be as simple as turning monitors off standby at night). Every tonne of carbon cut saves the environment and saves your money.

Get people talking
Customer recommendations and word-of-mouth are powerful marketing tools. If you have a satisfied and loyal customer base, figuring out ways to get them talking (such as refer a friend schemes or viral email campaigns) could help cut other more costly acquisition marketing activities.

Review your IT
Look at open source or hosted cloud software services as a way to reduce IT hardware/software costs. Go paperless; a paperless office could cut your stationary costs and help save the environment.

Enable mobile working
Nowadays, many employees who regularly attend off-site meetings are equipped with portable computers. Adding the ability to get online - via mobile broadband connections, for example - could enable employees to work remotely in-between meetings, minimising travel expenses.

Tighten up your supply chain
Work with suppliers, partners (and potentially customers) to improve supply chain management. This could lead to better managed logistics, increased process efficiencies or a reduction in waste or stock / raw material requirements.

Cut recruitment costs
Your current employees might already know the perfect candidate, so try referral schemes to source job applicants. Recruit direct (but be sure your recruitment practices are up to scratch) and/or advertise on online job sites. Recruit internally by developing existing staff into new roles.

Work with students
Students crave experience, are hungry to do well, and come from their studies brimming with ideas. They are a valuable, cost-effective talent pool.

Show employees you care
If employees feel valued they are more likely to be motivated, productive and loyal. That translates into increased efficiencies and reduced recruitment costs.

Offer benefits in kind
If you can’t afford to give pay rises, explore benefits in kind instead. You could offer benefits such as gym membership, luncheon vouchers or health insurance; or you could even distribute share capital to key talent.

Conduct virtual meetings
Use voice over IP, webcams or video-conferencing to conduct virtual meetings. Explore online collaborative tools which let participants simultaneously work on documents in real time. Such services offer benefits which counter-act the lack of face to face contact, and also help minimise travel costs.

Bootstrap projects
The term bootstrapping is often used to characterise how many ‘dot com’ ventures develop new, early-stage ideas. It’s the art of proving a concept with next to no cash, and usually encourages lots of imagination and ingenuity. Not a suitable approach for all projects, but for some, it may reduce risk, minimise cost and spur innovation.

Innovate
A new idea (or an old idea that is new to you) which solves a costly problem could help improve the cost-efficiency of your processes. Innovation could also improve the quality of your products and services, delivering competitive advantage.

Marketing : focus on value

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Marketing budgets are prime candidates for cost-cutting during times of economic hardship. It’s an expensive pastime, and unless marketing delivers specific and measurable results, it’s hard to justify its existence.

At the same time, some businesses significantly increase their marketing spend during downturn. Costly, yes, but it’s what brings in customers and bolsters the bottom-line.

Marketers can certainly cite evidence to justify their existence during downturn. Research conducted by business publisher McGraw-Hill during the 1980s recession found that companies increasing marketing spend saw up to 256 per cent sales growth over companies that curbed promotional activity. It is, after all, logical to think that as wallets shrink and consumer needs change, more must be done to drive sales.

Trigger-happy marketing seems to be getting popular as times get tough again. Recent research from the Open University’s Small Enterprise Research Team indicates that 49 per cent of the 700 businesses surveyed believe increasing marketing spend is key to beating the downturn. 42 per cent of businesses also planned to refocus their businesses to push into new markets.

But wait, one minute, before spending more on marketing… Just as economic downturn affects you and your marketing budget, it affects consumers too. It impacts their wallets and their minds. As a result, it’s important to re-evaluate your understanding of consumers, and re-think the way you speak to them. Important enough that you should do it now, before increasing marketing spend.

When consumers - of the domestic or corporate variety - decide whether to buy a product or service, they weigh up the costs against the value proposition that marketers’ put before them. Price and value may also be compared with competitor offerings. In doing so, consumers judge what value their purchase would deliver, and then decide whether and where to buy.

The customer value proposition represents the collection of benefits you offer in return for payment for your goods or services. It might laud your superior quality or highlight your unbeatable prices, or present specific benefits such as ‘our energy efficient kettle saves the environment and saves you money’.

During healthier economic times, focussing your values on superior quality or innovative design might have drawn customers through your doors. Today, those same customers might be feeling the pinch, and may intrinsically look for more financially orientated values. This doesn’t necessarily mean you should cut prices, just that your value proposition could more explicitly focus on the financial values of purchase. That innovative kettle might be expensive, but if it saves the earth and saves you a few pounds on energy bills, it might still appeal to even the cost-conscious consumer.

In essence, it’s about getting into the minds of today’s consumer, and re-evaluating your value proposition within that context. It’s about experiencing economic downturn through the eyes of your audience, and understanding how the current climate changes their needs and their perceptions of your brand.

Of course, none of this obliges you to change your value proposition. Your audience may not exhibit changing needs resulting from economic conditions. Or, you may decide that repositioning your values would devalue your brand; a dynamic which could be hard to reverse in the long-term. Nevertheless, an awareness of your value proposition and how it sits in today’s marketplace may help you understand and anticipate the economic and environmental influences affecting your sales and marketing.

Re-thinking your value proposition can also help you engage with new market segments or increase market share. A simple value proposition that assures superior quality but also focusses on financially-orientated values could, for example, allow you to better engage with market segments that previously dismissed your products or services as too costly. To emphasise again: it’s not about price, it’s about what values and benefits you focus on when you talk to consumers.

At the beginning of this article we talked about the virtues of spending more on marketing during economic slowdown, and uncovered that a sizeable percentage of businesses are planning to do just that as a key tactic in beating downturn. If re-thinking - and where necessary re-defining - your value proposition leads to more relevant marketing, the extra money you inject into the task will pay dividends. That alone could help you survive downturn, but also help you draw customers away from competitors, move into new market segments, or expand your market share.

One choice quote concludes this discussion nicely… Mary Beth West, Chief Marketing Officer at Kraft Foods, talking specifically about marketing tips during economic downturn, commented that: “Once you’ve figured out that value proposition, redefined… Spend into it. Because unless they hear about it, it’s not going to make a difference.”

Re-thinking your value proposition might seem like a challenge. But give it a minute, because it might be what makes your extra marketing efforts successful.

More info - Sales & marketing: the basics

London 2012 Games: Trigger a step change

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on 11 September, 2008
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Last month’s Beijing Olympics were huge – but the London 2012 Games will be even bigger. They will be the largest ever staged with more than 10,500 athletes from 205 nations taking part in 300 events across 34 venues.

Some nine million tickets are expected to be sold and 20,000 media representatives will attend. But, while the public focus will be on medals and new world records during the Games themselves, South West businesses are being urged to look at them as an important way to take their growth to the next level by securing more public and private sector work.

Watching the Beijing Olympics gave us a glimpse of the sheer scale of the commercial opportunity. The most important events to take place in Britain for 50 years, the London 2012 Games will have a major impact on the national economy. The Games present one of the biggest procurement opportunities this country has seen for more than 50 years.

And yet, the £billions worth of contracts to be won is only part of the story - key industries and regions will enjoy huge further benefits.

Nick Weaver, Business Link spokesman said: “We must begin to think through the sheer scale of the impact that hosting the London 2012 Games will have on our region. Businesses must begin to pre-empt the opportunities – and get themselves into shape to meet these effectively.”

One obvious, crucial area for the South West economy is tourism. When Australia staged the 2000 Olympic and Paralympic Games, Sydney alone made in excess of £2billion from tourism.

In our region, tourism is one established sector that could reap great rewards from the London 2012 Games – not forgetting that all the sailing events will be held in the South West at Weymouth.

From the experience of the Sydney Olympics, an increase in visitor numbers can be expected before the Games as a result of an increasing focus placed on the UK – this will, of course, peak in the summer of 2012.

But, it isn’t just the tourism industry that will benefit. There will be increased demand in a wide range of sectors. The London 2012 Games will also serve as a useful platform for companies to access world markets and generate new business opportunities.

UK Trade and Investment, the Government’s exporting agency, is also promoting links for London 2012 suppliers looking to establish partnerships overseas, both for inward investment and exports.

Nick Weaver said: “Inevitably, it is the London 2012 Games that are focusing people’s minds – but local firms must also consider the broader opportunities. £billions of additional commercial benefits will be generated by peripheral activity including infrastructure developments and tourism.

“In planning for the London 2012 opportunity, businesses must be creative in identifying these opportunities and developing plans that allow them to capitalise on them.

“In helping local firms get in shape for the London 2012 Games, Business Link’s information and advisory teams are urging companies to focus in their planning on this wider opportunity.”

More info - London 2012 opportunities:

HR focus

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Business Link
on 11 September, 2008
in HR & People Development
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This month: What employees look for in a perfect boss; Six million sue their employers; New national minimum wages rates in October.

The perfect boss

Research from the Learning and Skills Council shows that a commitment to training and professional development tops the list of employee wants. In contrast, employees are less engaged by  bosses attempts to create a relaxed and social working environment.

The survey, which questioned over 2000 people, found that 61 per cent of employees “want to work for an employer who demonstrates a commitment to training”. Over half of respondents believe the perfect boss is “someone who believes in their employees’ futures by encouraging professional development”. This shows that employees aren’t just hungry for training, but hungry for a boss who genuinely sees value in employee development.

In addition, 60 percent of respondents highlighted the importance of a boss giving credit for great ideas, which underlines an employee’s need to feel respected and valued by bosses and peers.

Less wholehearted gestures are far less valued, according to the research; just 17 per cent of respondents were engaged by a boss who regularly organises subsidised social events, and only 19 per cent of employees were interested in bosses who let them leave early on a Friday.

These finding show that - on the whole - employees value bosses who are genuinely committed to their professional development. And whilst gestures such as social events and early Friday finishes may not go unappreciated, they do not act as a substitute for a committed, development focussed boss.

Training is clearly a big issue for employees, and employers would do well to remember that. But it’s also important to ensure that training is considered and implemented with the business’s interests in mind. As previously discussed, it’s important to consider the various expectations for training, from employees’ needs through to the ’strategic expectations’ of the business itself. We also discussed how pinning down the strategic needs of a business can be achieved through a training needs analysis.

By satisfying the training and development needs of both the employee and the business, the perfect boss can offer universal benefit for all.

In November (following our October Legislation Update special edition), we’ll explore e-learning; a tool which offers cost-effective benefits for all, from directors to assistants.

More info:

Fit the training to your needs

Find out more about skills and training

Six million sue their employers

Recent YouGov research indicates that 11.8 million UK employees have suffered from an illness or injury caused by their job in the past year. An astonishing 6 million have sued their employer as a result.

One-quarter of employees taken ill suffered from stress and anxiety, and another quarter from back problems. Importantly, such conditions are not typical to a particular industry sector or job role, indicating that a wide range of businesses are susceptible to illness or injury of these types.

54 per cent of the total 11.8 million sufferers - which equates to 6 million people - have subsequently sued their employers.

Such widespread litigation suggests employees are becoming more willing or able to sue their employers. This may be because suing is easier to do these days, but it may also be because employees are becoming increasingly aware of an employer’s responsibility to their employees. Looking at the figures, it seems apparent that the majority of sufferers believed their illness or injury was due to employers shirking their responsibilities. If that’s the case, it’s right that employers should pay the price.

This trend underlines the importance of risk management in the workplace. Risk assessments ensure employees’ health and well-being are safeguarded, thus reducing the potential for illness or injury from the outset. Fulfilling such obligations - and crucially, correctly documenting them - are important steps for prevention but also for proving legal responsibilities have been met.

Protection, in the form of liability insurance, also ensures your business can deal with costs and compensation claims arising from a legal dispute. If you employ people it is most likely that liability insurance is legal requirement.

More info:

Risk assessment

Liability insurance

New National Minimum Wages Rates, 1 October 2008

Revised national minimum wage rates come into force on 1 October 2008.

For pay reference periods* beginning on or after 1 October 2008, employers must pay eligible workers the following:

•    £5.73 an hour to adult workers aged 22 and above
•    £4.77 an hour to workers aged 18-21 - the development rate
•    £3.53 an hour to workers aged below 18 who are no longer of compulsory school age
•    £4.46 per day as the daily accommodation offset.

More info on the changes - New NMW Rates - October 2008

More info - Understanding National Minimum Wage Law

*What is the Pay Reference Period?

The pay reference period is the basis of calculating whether the national minimum wage is being paid to an employee.

The pay reference period is usually the interval at which an employee is paid, i.e. daily, weekly or monthly. For the purpose of calculating the national minimum wage, a pay reference period can be no longer than one month.
Pay allocated to a pay reference period includes:

  • pay received during that period; and
  • pay earned in that period, which is not received until the next period. This may include overtime, bonus or commission payments earned but not paid until the next period. If payments are delayed by more than one pay reference period, they cannot be referred back to the period it was earned, so should be counted in the period it is paid.

Employers do not have to pay the minimum wage for each hour worked - employees must be paid the minimum wage on average for the time worked in the pay reference period.

More Info - The Pay Reference Period

Customer Relationship Management

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Business Link
on 11 September, 2008
in IT & eBusiness and Strategy & Operations
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The worldwide market for customer relationship management (CRM) software increased by 23 per cent in 2007, according to a global study from Gartner Research. Western Europe accounted for just under a third of the total global market.

Such rapid growth has been driven by “continued rapid adoption of software as a service (SaaS), and a continued focus on investments that promote customer retention and enhance the customer experience”, says Sharon Mertz, research director at Gartner.

It appears that the key motivator for adoption of CRM systems is the provision of improved contact management between a business and its customers, and with it, a better customer experience and improved customer retention. In addition, CRM systems help to reduce costs through automation of customer-orientated processes, and allow businesses to analyse customer data to better fulfil future customer needs.

These benefits provide the key motivations for adopting a CRM system, but what is arguably more important to today’s CRM software industry is the key enabler. Or in other words: they key factor enabling more and more businesses to adopt CRM systems. That enabler is Software as a Service (SaaS), or in more simple terms: the Internet.

Software as a Service, or SaaS, has enabled complex CRM systems to be hosted and maintained remotely - on suppliers’ servers - and delivered to end-users across the Internet. This model provides benefits for businesses, large or small, that want to avoid the headaches of managing an in-house CRM system. Those headaches might be caused by the costs of server equipment and data storage, or the resources required to create, maintain, update and improve in-house CRM software systems.

The upshot of this trend is that companies that had previously not been able to adopt CRM systems because of limited budget or resources can begin accessing and using such services instantly and cheaply. The mechanic can use a CRM system to automate MOT reminders. The field salesperson can access and update customer records on the go. The retailer can track sales trends to better understand customers and plan future stock purchasing more effectively. The list goes on.

In today’s cost-conscious economy, CRM systems offer twofold opportunity. First, there’s the established adage that it’s cheaper to retain existing customers than find new ones; CRM systems are well-placed to facilitate this customer retention process (not to mention CRM system data can also be used to plan customer acquisition). And second, the decreasing set-up and ongoing costs of CRM systems means that such benefits are becoming more affordable (numerous online CRM systems cost just a few pounds per user per month, and some are free). Low operating costs, combined with the opportunity to obtain increased value from existing customers, adds up to a significant opportunity for many businesses.

Of course, online CRM systems do come with their share of challenges. Businesses have a responsibility to ensure the integrity and security of customer data - a task which must be given due consideration when adopting remote, online services. It’s true that modern online systems can theoretically be as secure as in-house networked solutions, but with that said - and especially while the SaaS industry is in its relative infancy - it’s important to focus on data security as key priority. Issues of implementation also exist, primarily the challenges of training staff to use a CRM system effectively.

The latter point - about the effective use of CRM systems - is arguably the most resonant and broader issue facing businesses that use or are considering using CRM systems (online or off). It’s true to say that a business with the best CRM system can experience poor customer relations, and a business which relies solely on the ‘human touch’ can show the closest relationships with customers. Good systems cannot replace good people, so it’s important to remember that technology is only part of a wider CRM strategy. Making the distinction between what a system should do and what people should do is an important step in building a comprehensive and effective CRM strategy.

Despite the challenges associated with adopting and managing CRM systems, the benefits are apparent and increasing. As costs fall and the benefit of retaining customers becomes increasingly more important in a challenging economic climate, the cost-benefit equation of CRM is becoming more and more positive. These factors explain the uptake in CRM software over the past year, and serve as a sign to businesses that haven’t explored such systems that now may be a good time to do so.

More info - Customer relationship management