Give your business bottom-line a hand up!

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Since we're in the middle of a bit of an economic downturn, at Solaré, we are constantly looking for ways to reduce our operating costs in order to give our bottom line a little boost or a hand-up.  Now, there's many ways a company can save money in the slow times, but it is important to consider a few things:

1.  How long do you anticipate this slow period?

2.  How long can you survive with limited income?

3.  What can I save money on and still operate?

4.  How can I ramp up sales?

Although they certainly don't make a "Downturn for Dummies" book, I'm sure it would be a hot seller, as everyone wants a quick fix or special trick to keep the lights on.  Unfortunately, several factors come into play such as strength of your local currency vs. where your suppliers are located, government policy, elections, and consumer confidence, etc. most of which are out of our control.  Let's take a look at each of these four items individually.  Although I am not a genius in economics, I'll comment on just a few things that we have had some success with in our present and past companies.  

#1.  Anticipated  longevity of inactivity.  Where we're from, our economy is largely driven by the oil and gas industry.  This, plus a really low Canadian dollar makes for an interesting combination, but we also know that every eight years or so oil prices tank, companies go out of business, and then things pick up a year later and everyone forgets the crazy cycle.  The trick in the first place is to spend like you're not making money.  Apart from scaling up or diversifying operations, run lean when possible.  This could mean less company vehicles, paying closer attention to expense accounts, less business travel, lowering utility costs or even reduced staffing levels.  These slow times separate the "wheat from the chaff". 

#2.  Surviving with limited income.  Determining your burn rate is beneficial as it gives you a forecast of just how long you can wait things out.  There are many ways to reduce burn rate, and too often it is reduced by layoffs long before other ways are even explored.  As previously mentioned, there are several great ways to reduce your "burn", such as booking business trips to coincide with your industry trade shows so you can call on as many vendors or clients in a short period of time and saving multiple air fares.  Industry trade shows are a great yet often missed opportunity to contact numerous people; book appointments within the shows, and gather as much info as possible.  Going to a show in Vegas may be great, but we do have the temptation to duck out and go play.  I make it a point to narrow down who and  why I want to talk with to and make a point of setting up a meeting with them.  After all, this is work, and saves thousands of dollars in airfare and potentially months of travel.  Limiting personal travel with company vehicles is also effective, and although your employees may not like this, it beats the alternative.  Small things also add up, and never overlook items such as office and shop supplies, inventory control, and employee accountability.  Gloves, for example, are a costly item that are often worn once and lost, so make sure everyone is aware of the financial situation and conserves these valuable resources.  Bring a lunch. Taking the staff out for lunch a couple of times a week may seem like a real morale builder, but having to do layoffs leads to extremely sad,demoralized staff, and your employees will appreciate your austerity.  Have a good hard look at your burn.  Be honest with yourself about it.  It's a matter of running more efficiently than your competitors.

3.  Saving money.  There's a lot of things you can do in this category, so if I've missed a bunch, go easy on me...any comments will be appreciated.  A lot of these were covered in the last topic, however, I would like to expand on it.  With regards to staffing, it has always been my feeling personal that you should hire one employee, work them like three employees, and pay them like two employees.  I'm not sure where I heard that concept from, but it really works, and creates less "idle" time from your staff, often resulting in a full day's work.  Another solution without reducing staffing levels may be a government program that offers an alternative to layoffs by covering a portion of the wages.  There was a program with Employment Insurance called "Work Sharing" that we had taken advantage of at a previous company with great success.  One of the things we have done at Solaré is made a commitment to use only LED lighting in our building right from the refrigerator light to our sign, and all the lights in the shop and showroom.  Lighting energy, depending on the space, can account for up to 80% of the total electricity cost within a company.  LED lighting can reduce this 80% by another 80%!  These lights usually pay for themselves in around three years, but actually have an ROI and will cost about 1/5th the cost of maintaining traditional lighting.  Apart from this, simply turning lights off when a space isn't being used helps out in a big way, and use your gas heating over small individual heaters- they're killers on power!  Other small things not often thought of really add up, like switching from a single cup coffee maker to brewing coffee (~55 cents per cup vs. ~18 cents per cup).  Watch the pennies, and the dollars will take care of themselves.  A great book about this simple concept that I highly recommend both you and your staff read is The 1% Difference (Lyons and Lyons).  It made a huge impact on my life.  

4. Increase Sales?  Seems a bit counterintuitive, but you can actually increase your sales in certain recessed economic environments.  If you are a manufacturer in Canada and facing a lower Canadian dollar, can you sell into a stronger dollar economy such as the U.S. or even Europe?  If you primarily consult, can you sell services over the pond or across the border?  You can still make your normal day rates while offering a bargain to your out of country clients.  Locally, at home, you may find another purpose for a piece of equipment.  For example, you may do skidsteer work for municipalities.  Could you try to get some work on residential jobs?  One less piece of equipment and employee sitting idle.  

To conclude, I would urge you to think of your business as your child; protect it, keep it alive and thriving.  Practice austerity where possible and always keep your staff in the loop..when they feel a part of the solution, the morale will be higher and confidence levels will be retained.  Remember, your employees are relying on you!

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