More than a decade into the world of digital business and following a deep global economic recession, organisations are discovering new ways of operating that challenge many long-held assumptions.
We are witnessing the rise of slimmer, smarter businesses that operate in new cost-cutting ways, taking advantage of new collaborative technologies and a globally available resource base.
These organisations are ‘just big enough’, highly focused on delivering value, and use data to drive insights and innovation. Some of these businesses were start-ups not that long ago and some are long-established, but all share a new mindset and belief that growth does not mean the number of people you have in your organisation, but the value you create. We call these organisations, Size Zero Enterprises.
Size Zero means operating at maximum efficiency by focusing on where value is created, and being ruthless in removing waste. Doing more, with less if you like. Minimising cost is critical to this theory and key to ensuring the highest level of value.
Here are five ways to reduce business costs and point your organisation in the right direction to achieve a Size Zero:
1. ZERO “PASSENGERS”
Work out who in your company creates value, who supports them and who is just part of the machinery. This is not just about revenue generation but goodwill generation and customer success – all of which add value to your business.
Take a long hard look at those who achieve none of these things. Aim for Zero overhead staffing. In other words, everyone should create value not simply be a passenger. A series of “what-if” exercises will soon tell whether you have the balance right.
2. ZERO “BAGGAGE”
Redraw your organisation chart, but this time look at the way your suppliers and other non-payroll resources fit in. What shape is your chart? Fat in the middle or the top? Could your suppliers take on more or do you have too many?
“Outsource everything except your soul,” the management guru Tom Peters once exhorted. As well as the savings on statutory payments associated with employment like national insurance, an outsourced workforce can be tuned up or down to reflect the peaks and troughs of demand.
Do some calculations based on removing a whole department and sourcing skills from outside. Do you need your current list of retained agencies and supplier rostas? Aim for Zero additions to payroll over next 12 months.
3. ZERO PROPERTY COSTS
Seriously consider moving. Look at comparative costs in less popular neighbourhoods. Office costs in London’s West End are the most expensive in the world at $272 psf, so why not consider a move to Midtown Manhattan where it’s just $135 or Dallas which is as low as $17.27 (Loopnet, TX market trends ).
Look at properties half the size. Who could work remotely? Who could desk share? Aim to lose a Zero on your rent bill.
4. ZERO UNPROFITABLE CUSTOMERS
Don’t be distracted by customers who take up you time and resources but contribute little in revenue. The customer is king but so is cash.
How well do you truly know your key customers and how distracted are you from focussing on your most valuable customers by the least valuable yet ‘noisy’ minority? How good are you at analysing your per customer profitability?
5. ZERO BUDGETS
Consider Zero-based budgeting where budgets are not based on previous years, but start afresh from zero.
Typically, a business will produce a budget based on the previous year’s spending and add and subtract a percentage. This is the lazy way to reproduce a budget and can lead to throwing good money after bad. Start from scratch every year and you will soon find savings.
Size Zero is a way of looking at enterprises, it is not simply about saving money, rather it is about doing business in a way that maximises value. Cutting unnecessary costs and minimising waste can take time, but is critical to achieving a Size Zero and creating a more valuable company.
Philip Letts is CEO of blur Group.
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