In October, Real Business hosted a roundtable in partnership with Canon at Brown’s Hotel in London with the topic of cost control.
Former RAF pilot Adam Twidell, who is the CEO of online private jet booking service PrivateFly, had a fairly unique early approach to cost control. He believed in the idea so much that he managed to convince his wife to sell their house in order to fund the project.
“When you’re spending hard-earned cash, have young kids and take a risk, you feel every pound spent,” he recalled of his decision.
As such, he added: Thats a culture I dont think has left us. Even though were better funded now, I still treat it as my own and I’ve instilled it into employees to do the same.
However, he did add that the approach needs to be balanced with people that perhaps aren’t quite so cautious so the business doesn’t miss out on opportunities by shying away from risk.
For fellow roundtable guest Steve Folwell, although the business he leads is equity funded, he admitted to taking a salary risk having joined box-based storage startup LOVESPACE from the position of business development director at The Guardian.
The culture you start with is critical in the way people think about cost,” Folwell said, explaining that in the beginning you only have an idea and cost no customers or revenues.
The way we manage it is that we know what the cost model needs to look like to win custom the cost of moving a box, storage and acquiring a customer.
From there we experiment and embrace risk to take those costs down like working out of a rubbish office to begin with and using cheap business cards,” he detailed.
VaioPak founder Joe Fogel, who is growing a company in the food packaging space, reckons the issue of cost control is easier when it’s a company that you’ve created personally but said you can sometimes forget and become carried away.
Consumables, business cards all of the little things you think are nothing can be an overspend. You can drop hundreds on business cards when starting up as you get misled by glittery things around you,” he commented.
As a team grows it’s easier to lose control of costs because you need to get everyone else to think the same way.
While it’s important to monitor costs, James Capel of Simply Waste is of the opinion that too much time spent on cost can actually be detrimental. He used an example that instead of spending 50 on a product for immediate delivery, you can become consumed by looking for a 30 deal which can have a knock-on effect.
Sometimes it’s available now and youll buy now because time is better spent elsewhere,” he reasoned.
Some buyers become so transfixed on unit cost. We try not to become too hung up on finding something five per cent cheaper for a part that will take three days to arrive,” he added.
Canon’s Mark Robinson is well versed in cost management. As the business development manager, he works alongside small office-based companies with anything from two to 20 team members and delivers services according to needs.
However, after a spell at Canon, he left for a medium-sized family-run company where they asked him to spend money as if it were his own. He carried those methods into an Italian firm that wanted to expand internationally, before returning to Canon to harness his newfound experience with small clients.
The key is to risk where it’s warranted,” he said, acknowledging that cost control has a spectrum and it’s not necessarily printing in colour that’s going to break the bank.
As a business that comes complete with both consumer and business-facing platforms, Kabbee is in a slightly different place. According to Phil Makinson, co-founder and CDO at the business, the real challenge on the operational side is to get the data and allocate it against the business with costs per job.
Folwell simplified his thought process when it comes to making choices about spending.
In two years’ time will I look back and think that was a stupid decision Will it work in the long run There are a few costs that are completely critical, so you need to think in an entirely different way.
On the back of that, Fogel offered that you should highlight the most important costs, but admitted that you’ll only truly become wiser and learn from mistakes. Advertising is huge for us,” he said. We used to do a lot of trade shows and local media press, but we haven’t done any for the past three years now. Only Google works for us and we only learnt that by going through it.
Capel encouraged business leaders to take time out, sit back and review what the business has done and where it’s heading to manage costs.
You might be time-short to get the job done,” he conceded, but sometimes you need to look back and take stock. Sometimes we’ve been too forward-facing and then had to go back and look at where weve spent too much to keep the business rolling the way it has.
Twidell emphasised that data and analytics are what a company has to have to know what is working or we would never have known something had paid off with a customer .
He joked that he’s the biggest risk in the company because he’ll try and lead the team in various directions. As a result, his leadership team has developed a knack for pacifying his more outlandish strategies and developed a poster for him as a reminder of boxes the plan needs to tick in order to go ahead.
Robinson said the ability to say no can be supported with a dashboard a product both he and Canon love. IT resellers have data but it’s a right mess. But pull data properly and it saves time.
Capel agreed and explained that even if a firm has a financial director in place, you need quality and timely information, and it needs to be summarised .
He added that at Simply Waste the company contextualises cost control for staff. With roughly a 1 profit made on each bin emptied, you know how many need to be emptied to pay for something like 500 worth of damages to a driver’s vehicle.
Another way the leaders revealed they manage costs are through fixed costs, which were acknowledged as a downside because of a set period of time, though the upside of things like outsourcing HR or paying for insurance in one is that there’s more time to focus on other tasks.
Wrapping up the roundtable, the key learnings for some were the importance of digital efficiencies like data for growth and successful finance management. All know there are a growing number of digital tools at their disposal, it just comes down to building the right infrastructure and then assembling a team that is bought into the notion of tackling cost control with quantifiable data.
As Robinson puts it: Data is king. Whether it’s a dashboard, however it’s represented, look and understand.
Top tips from each roundtable business leader:
Mark Robinson, Canon: When I speak to the next IT office reseller I see, I’ll say: understand what the value of a small business leader’s time is before you delve into the real low end costs that are wasting time. Then look at how that reinvested to build the business.
Adam Twidell, PrivateFly: Invest in digital efficiency at an early stage because, as you scale, it’s a real cost saver. Understanding customer’s budgets is also hugely important.
Steve Folwell, LOVESPACE: Set a base which is strong and cultural. Concern around costs should be focused on two or three big costs that you care about from a strategic point of view. Let everyone else worry about the smaller costs. I’d also encourage you to think clever don’t assume that you can’t do things smarter.
Make sure you have reporting in place. Ideally, an online dashboard to keep an eye on cost metrics in a format that you can understand.
Joe Fogel, VaioPak Group: Although we have data collection in place, we don’t act on it as much as we should. Historic data is also very important, and I feel you can build continued growth and keep existing business that way.
Phil Makinson, Kabbee: Buy cheap, buy twice. You’ve got to take the risk to build out the process and feel the discomfort you might get in taking more time upfront to get something done right.