Now that we’re about 50 days into the new year, we are beginning to see some early trends emerge from our clients, and the SMB community in general, about how to increase profitability and maintain market share. After a year or so of fighting inflation through higher interest rates, all public measures indicate that inflation is increasing at a slower rate. Interest rates are still high comparatively, making borrowing more expensive; but perhaps borrowing will become more easily accessible once financial institutions get a decent feel for how the American economy is faring in general. In addition, it appears that the supply chain strain that has affected so many businesses over the past couple of years is abating, resulting in slower price increases from suppliers and more normalized quantities readily available.
One person who embodied the spirit of cutting costs was “Chainsaw” Al Dunlap. Dunlap was a well-known business executive from the 1990s who earned his nickname by turning companies like Sunbeam, Scott Paper and Kimberly-Clark around. Although his approach to cutting jobs and business expenses was seen as cold by his critics, he felt that his ability to look at things analytically and make difficult decisions was imperative, especially during times of economic slowdowns when companies fight for survival. For a more detailed understanding of Mr. Dunlap click here.
So what does all this mean for the entrepreneurial community?
It means that we are starting to focus on cutting costs more than raising prices in order to reach 2023 budgeted profitability and operating income metrics. As you consider ways to save money and expenses, the best way to do that is to go down your income statement and examine the expense categories, particularly where the larger areas of money spent could potentially be cut back as a cost-saving measure. Here are some typical examples of of the larger line item categories:
It is still early enough to make changes that were not planned out in your original budget process. It’s always good to evaluate expenses to ensure that you’re getting the best product and pricing for your goods and/or services sold. With business processes returning to normal (whatever that means), now seems to be an optimal time to take a good look at where you are spending your money and if you’re getting the maximum return. Don’t throw good money after bad.
Take-away: If you haven’t taken a deep dive cost-analysis on your business for quite some time, reach out to Brian or Scott at email@example.com for a free diagnostic.
Co-founders & Managing Partners