Most CEOs at one time
or another have to
endure the difficult challenge of cutting costs to
make ends meet.
And they often make the
mistake of trying to do just
enough to get by, leading to a
second cutback and perhaps
even a third, says Jeff
Susbauer, co-founder and principal of Business Owners
Consulting Group and associate professor of management
and labor and director of the
Small Business Institute at
Cleveland State University.
“Companies have a tendency
to not bite the whole bullet at
once in spite of data that says
you determine the whole picture of the crisis,” Susbauer
says. “You deal with the crisis
to solve it as a plan. If that
means 15 percent needs to go
as opposed to 10 percent, you
do the 15 percent. You tell the
people who are left, ‘Alright,
business as usual now. We’ve
cut out the part of the business we didn’t need. Go do
your job.’”
Having a knee-jerk reaction
to the situation is one of the
most common mistakes that
companies make when trying
to get a handle on their expenditures.
“They literally don’t think
about it systemically,”
Susbauer says. “They focus on,
‘Oh my God. I just got a price
increase from my major supplier. My cost of delivery just
went up because the price of
gasoline went up.’ If you’re
running a business, you
respond to the immediate crisis. Chances are pretty good
that if prices or costs are going
up in one area, they are probably going up in other areas.
You need to get the big overview to see what is really happening.”
To illustrate the danger of
reacting too quickly to control
costs, Susbauer uses the
example of a company that
cuts out overnight hotel stays
for its sales force.
“That means the guy who
has got the eastern territory
has to drive 150 miles back
home tonight after he finishes,
and he has to go back there in
the morning,” Susbauer says.
“I cut down the hotel cost and
the meal cost, but he’s going to
charge me 48.5 cents a mile
for 300 miles. That’s $150. I
don’t think I gained much.”
As a business leader, you
need to make the time to
monitor history and trends in financial reports.
“There are things you
should look at,” Susbauer
says. “How is my company
doing versus last year or versus the year before? I don’t
care what the accounting
period is, as long as it’s an
apples-to-apples comparison.”
Stay in touch with your
accounting department and
make yourself approachable
for regular reports from your
accountants, whether those
reports are good or bad.
“The tone is set at the top,”
Susbauer says. “There is an
outstandingly successful businessman I absolutely respect.
He maintains you cannot create a culture of trust. You can
create an environment where
trust can emerge. That starts
with being open. It starts with
not decapitating the messenger. It really helps if you use
words like, ‘I didn’t want to
hear that, but thank you
because I needed to.’”
And make sure that person
has the experience to put the
message in context.
“Most good accountants not
only should be able to give
history, but they should be
able to help a business owner
understand trends and what
is going on in their business,”
Susbauer says. “But most
business owners don’t want
to pay for it.
“It’s like many of the things
that happen in business. If
you don’t give it attention and
don’t give it systemic attention, all you’re doing is putting Band-Aids on it. If the
patient is hemorrhaging from
multiple areas, Band-Aids
don’t work.”
HOW TO REACH: Cleveland State University, (216) 687-4747 or www.csuohio.edu; Business
Owners Consulting Group, www.bocg.com
Watch the numbers
Staying in touch with your
financials becomes a lot easier
when you have people who
expect a regular report on the
numbers, says Mario F.X.
Salwan.
“The best thing is probably to
have a board of advisers and to
meet with them on a quarterly
basis,” says Salwan, president
of Buckeye Painting and Decks
Inc. “You would have to prepare
your financials for them and tell
them what you’ve been doing
and let them basically oversee
everything.”
Salwan says that having to
present the numbers to someone else forces you to focus.
“In the process of preparing
for those meetings, you’re also
making sure to check those
budgets and do the paperwork
that normally gets put off
because you’re going to have to
present it to your advisers,”
Salwan says. “They’ll come back
and give you some feedback on
how to control cost and raise
revenue.”
Salwan says cost control
should be a constant topic of
discussion and that you should
make sure that your employees
know that their ideas on the matter are always welcome.
“Usually, your employees will
have a good grasp as to things
that might make the day-to-day
job go smoother,” Salwan says.
“Weekly meetings get me in
front of everybody so they feel
like they could pick up the phone
and call me if they think of
something.”
HOW TO REACH: Buckeye Painting and
Decks Inc., www.buckeyepainting.com or
(216) 292-1500