How to save money in tough times

The same applies to individual businesses. The commercial battlefield is littered with the corpses of those who have cut too hard, too often. During the 1990s, for instance, Britain’s formerly nationalised steelmaker, British Steel, insisted on cutting costs year after year – the result being that it put its own suppliers out of business, thereby incurring extra costs and sowing the seeds of its own demise.

One of the problems is the language we use. We should talk about saving money, not cutting costs. If you only think about cutting, it is hard to be creative. It is possible to be creative about saving money, it’s essential. If you need to save money urgently, gather your senior management team, take them somewhere and have a no-holds-barred brainstorming session. You need ideas and you get more of them when you have a variety of different perspectives. That’s what I do, anyway.

You must look at those costs that are often thought of as “fixed”. Take property, for example. If you own your property, you can sell it and lease it back to generate capital; if you rent, you can still devise a commercial plan that allows for a workable renegotiation. In our business centers throughout the world, Regus has a number of high-profile clients who have abandoned fixed office space in favour of our flexible work-spaces. They found that not only do they save money on overheads, they also make productivity gains, as people make better use of their time.

Take a fresh look at your relationships with suppliers. You should be working with them as partners, looking for mutual benefits. It’s not hard to find common goals. Electronic ordering and invoicing, for instance, saves time, paper and money, but buyer and supplier have to ensure that their systems are compatible. So, get to know them better, keep your contracts flexible, and don’t commit to a fixed rate for a certain product or service for more than a year at a time. It will often suit you both to re-examine your terms of business in the light of market developments.

We always need to look at people. Sooner or later, most organisations in search of economies will look at headcount. It’s the wrong target. You shouldn’t be looking at headcount, but at productivity. If people are sufficiently productive – you can calculate that an individual is a net source of profit for the company – then why would you let them go?

In order to make employees more productive, you have to take them into your confidence and be prepared to embrace new working practices. Some people could do more work from home or be closer to their customers – which can mean they cost less in terms of office space, not to mention their own commuting time. Use video-conferencing so you don’t have the expense of planes, trains and automobiles. Ask them how they would like to work and contribute to economies – making it their problem and not only the company’s.

Finally, you need to look at your corporate culture.  Think about all the little things you can do to promote an energy-saving, money-saving, environment-friendly atmosphere at work. Encourage people to cycle and recycle. Don’t print emails unless you have to. Turn everything off at the end of the working day, unplug televisions and chargers (which consume a ridiculous amount of electricity), keep doors and windows closed if the air-conditioning is on and turn heating down a notch or two as well.

These are mostly common sense, but set the right tone – one of mutual respect and consideration – while making a real contribution to keeping costs down. In the course of exploring these and other possibilities, you may find you need to spend money in order to make savings over the longer term. Spend money on streamlining processes or investing in smarter systems and your initial outlay may soon be recouped by a reduction in your company’s permanent cost base. Perhaps you should outsource some back-office or non-core processes to low-cost countries, or make a tactical promotional offer at the right time and in a carefully selected market. You might steal a march on the competition.

When it comes to hiring and paying staff, there’s one good thing about tough economic times – they make more talent available. So when you find good people, pay and treat them well. Don’t neglect training; whether you’re talking about new recruits or veterans, if they can learn to get more done with less, you’ll be making a net gain. My attitude to spending is the same regardless of the state of the markets. When someone comes to me asking to spend money on something, I always ask: “Would you spend it if it was your money?”

If people answer no, or hesitate too long, they won’t find me reaching into my pocket. If they say “yes, because…” then I’ll be listening closely. The secret of success is to spend money on the right things at the right time – and there’s no better time than when competitors are retreating. Whatever the economic pressures, you have to retain a long-term view. You have to give yourself the chance to grow, to be in position to take advantage when markets pick up. A leader’s job is to create and foster a sustainable business for the long term. That depends crucially upon making your investments and divestment’s as selective and strategic as each other.

Steve Purdy is the UK Managing Director of flexible workspace provider Regus.

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