During a discussion with a prospective client, we reviewed some decisions that went from bad to disastrous. They were not selling and needed to find ways of reducing costs to make up for the lack of revenue. The decisions they made resulted in drastic revenue drops and reduced service levels. They nearly lost their company.
Assessing costs requires top leadership to look at the long-term picture. What can we cut? Where must we invest? What happens if we make bad investments and what happens if we cut in the wrong areas? Will service levels drop? What is the symptom vs the root cause of the problem?
I’m sure you have heard this many times; If a company is not growing, it is dying. Regardless of how great your business may be at whatever service or product you provide, you will lose some business. Even companies with unbeatable service lose accounts. Let’s face it if your customer can no longer afford to spend funds you lose!
Further, costs for a variety of business needs will increase. Just look at the price of medical insurance. I don’t need to belabor the point. So, let me state again, if a company is not growing, it’s dying. And to grow you need sales. Agree?
If then, you decide to cut your sales team to improve your margins how long will that benefit your company? Yes, you will see an initial bottom line improvement. You have reduced your operating expense. Big salaries, benefits, PT&I, mileage, bonuses and more.
This bottom line looks beautiful. Especially if you are bonused on improved profitability. You are the hero. You are on top of the world.
Beware, however, and don’t spend that bonus yet, in fact, keep it close by your side. Your world will start crashing if your issue is revenue rather than an expense problem. Possibly less if you can create some add-on business, however, this particular company did not have that option.
They have cut their lifeline. Thier sales team is gone (or in this example reduced to bare bones), and sales have nearly stopped. There are no more savings so now what? It’s not good! How did they get there?
Simply put, give me a strong top line and I can almost always give you a great bottom line.
Strategies have consequences, good and bad. In this prospects scenario, staff and other support systems were reduced to offset the additional revenue shortage. And, the staff that remained after the reductions suffered decreased bonuses. Some of their STAR employees started looking for new jobs. In one case an employee’s spouse was close to filing for divorce over the pressure of financial problems. The District Managers, with little help from the decision makers, were fiercely trying to figure out how to change processes to support the lean staff and engage an unmotivated team.
There went their best managers along with the excellent reputation they and their team all worked so hard to earn.
Are you facing major problems? Fix them! Don’t wait too long to adjust strategies. You probably know the sky is falling, and you may even know why, but that decision is simply too difficult to tackle. Don’t focus on the symptom, and don’t close your eyes or stick your head in the sand because this problem, allowed to languish will, without a doubt, continue to pull your company down and then everyone loses. If you can’t figure it out get help.
Fix the root cause because the longer that problem remains unresolved, the bigger your problems will grow.
Parone Group is a support system for executives and their teams. From creating superior service and a high-value culture to connecting you to resources for various business needs, we partner with you to determine very precisely what you want and need vs. what you have.
Next, we identify and walk you through the processes, tools, and resources required to pull it all together and work with you as much or little as you need or request.
Consider Parone Group your one stop shop. We save valuable time and provide the solutions, resources, and support that help maximize performance & profitability.
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