Ways to Control Costs and Boost Your Bottom Line
For many IT companies and similar fast growing organizations, being “lean” takes on several dimensions. Take for example the story of Shannon W, a process engineer for a growing IT service based company. Shannon W was trained to use “lean” concepts to save time and money. Fast forward several years and now she is an Operations Manager for a fast-growing software service provider. See below for her top ways to sustain fast growth by controlling costs.
Don’t Waste Time – “We’ve all heard that time Is money,” Shannon says. “That’s because it’s true. Every job in your company, whether customer-facing or in the back office, can be streamlined to eliminate waste and to improve productivity (translation: to cut the cost of performing that job).”
- Develop standards for how long a job should take and create incentives for fast workers.
- For tools to streamline your work, learn about kaizen (literally “change for better”).
- Schedule meetings for a fixed amount of time, stick to the agenda and wrap it up on time.
- Build a culture which values punctuality, concentration and working until a job is done.
Match the person to the job – In a fast-faced environment it can be tempting to let people pitch in where the work is, but be careful. Shannon says “Data entry only looks simple. You would be shocked at how many bright people can’t copy numbers from a page to a computer.” It’s better to hire a temp with the proper bookkeeping skills than to shift work to a random employee who may not be qualified.
Use Digital Marketing – Many businesses run ads in the same trade journals, based on how it was always done. But new marketing tools using social media, targeted email campaigns and digital relationship-building are sweeping away old methods. Digital media is quicker to test or update, and most important…it costs far less to get your company’s message out to a new or existing customer.
Use Virtual Tools – While there is no substitute for an in-person visit, many meetings can use Zoom or Skype. Instead of file cabinets, applications such as DropBox can replace the physical space required for paper documents. Most PCs can use open source software such as Open Office, which is free.
Focus and Execute – “The best advice I ever got was from a manager who warned me that the surest way to fail is trying to do everything,” says Shannon. “Limit the types of work you take on. You’ll become more specialized, and your quality will improve, along with your revenue.”
Savings are Everywhere – Think about your business from the front to the back. Are you using too much space? Could you rent part of your office or warehouse? Can you sell machining waste to a recycler? Can you design a product that can be made from leftover material?
Measure and Report – Karl Pearson, the statistics pioneer, proposed Pearson’s law: “That which is measured, improves. That which is measured and reported improves exponentially.” Make sure your team has clear data showing your primary cost drivers and how they are trending.
Shop Harder – Your suppliers should compete for your business on price, service and payment terms. “Tell your suppliers you are shopping,” says Shannon W. “Then check their prices against at least three others.” Check Staples against Walmart. Every dollar saved goes right to the bottom line.
Control the Cost of Quality – Quality can have a greater impact on cost than productivity. When you put quality first, you will have efficient processes, happy customers, fewer returns, more referrals, and higher prices. When you allow poor quality, you can throw away your price to keep business, but customers will still leave you as soon as they find a better price or a better product.
Get Lean and Mean – Use the lean concept of 5-S to Sort, Set in order, Shine, Standardize and Sustain. Make sure that unneeded items are not in the way of money-making tools. Organize what you need in a neat, efficient order. Keep work areas clean to be safe and efficient. Schedule regular cleaning and maintenance to keep processes running. And build a culture of 5-S by always following the first four.
Shannon W sums it up this way: “When you’re thinking about how to grow your business, remember that adding more revenue goes to the top line, and doesn’t find its way to profit until all costs are accounted for. But when you cut your cost, that savings goes directly to the bottom line, in the form of cash you can use right away for investment instead of expense”.