That cost-cutting fever is in the air there is no doubt. Businesses large and small are looking for ways to trim the fat (if there is in fact any fat left) so as to keep costs under control. That is a smart thing to do. With cash tighter right now and deals tougher to get, we have to be especially smart with our money.
But one thing is also certain, cutting back can also be one of the dumbest things you can do. If your cost cutting cuts into your ability to get customers, then you have gone too far. So yes, there are both good and bad ways to cut back. For example:
Smart way: Cutting your overhead. Maybe that means getting cheaper insurance or having employees pay a higher deductible (sorry, sad, but true), or whether it means finding cheaper rent, or getting a virtual office, or letting some people go, or letting them become independent contractors, keeping your overhead low is not easy, but it is smart, especially these days.
Dumb way: Cutting back on your advertising and marketing. This is the most common mistake I see entrepreneurs make when times get tough. Sure I could give you plenty of examples, but just consider the conclusion of a survey done by the consulting firm Meldrum & Fewsmith:
“Sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive marketing posture.”
Notice they didn’t just say that you need to maintain a marketing posture, but rather that you need to maintain, “an aggressive marketing posture.” Aggressive means aggressive. It doesn’t mean the same old thing. That means you have to get the word out, have a sale, have another, and get the word out.
First, in challenging economies, customer loyalty is an oxymoron. Customers leave. Marketing and advertising aggressively allows you to replenish your roster.
Second, what do people want right now? Yep, you know – cheaper prices. Well give them some then. Discounts, sales, coupons, twitter specials – anything you can do to let people know that they can get a deal at your place is probably a good idea right about now. Cut some prices. And then advertise those lower prices. I can almost guarantee that people will beat a path to your door.
So the bottom line is this: Be smart about your money, realize that other people are being smart about their money, and then give them a reason to be smart about their money at your business. You will end up with more money to be smart with.