Cost-cutting will only preserve a company in a difficult business climate for so long, writes Luke Johnson. Companies need to grow to survive, he argues, and with the recession suppressing demand, the easiest way to build market share is by gobbling up weaker competitors. A smart acquisition not only will allow companies to ride out the downturn, he writes, but also puts them in a better position to thrive once the recovery begins.
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Cutting costs should be ingrained in your business. You should ALWAYS be searching for ways to increase productivity and performance, working lean and smart. That allows your business to be positioned to strike when opportunities arise – like a competitor or supplier becomes a great acquisition.
Always remember that the cost-cutting cannot have a negative impact on the customer experience (a difficult result to achieve) because you can’t afford to chase away your customer base. So make sure you set up a monitoring system and have an action plan that, if necessary, can allow you to respond quickly and effectively.
A great many organizations cut a few service positions and save a couple hundred thousand dollars. But they fail to realize that this action has led to a couple of customers reducing purchases, shifting to the competition and telling a few potential customers that “things haven’t been the same since the let a few people go.” Suddenly that $200,000 ‘savings’ has driven away $1 million in revenue.