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3. Control Spending
Interestingly many people place spending restrictions at the top of their list.
Personally I do not believe that many of us are frivolous with our spending anyway
and thus I firmly believe that spending restrictions have a minimal impact and
effectiveness when dealing with quieter times. My thoughts here are about ‘control’
more than spending. I do not say stop spending…and I do not say stop spending on
marketing activity. Controlling spending in my book is to think before you go dashing
out for a meal with already friendly clients. Think a little before agreeing to spend on
the away-day with known associates and think before spending on another new
computer or electronic gadget that would be nice but actually is far from necessary ie
one that you have managed without for so long that another 3 months will not make
any real difference.
No, surviving a slowdown is not about stopping spending, and definitely not about
stopping proactive spending or marketing activity, it is merely a time not to be
careless. When cash is flowing freely take all of your friends out for meals but when
it might just dry up slightly ring them and wish them the very best. Control spending
when you have choice – because there will no doubt be occasions when you get
caught by a requirement to spend that must be dealt with. You might have a technical
issue that demands you fix it. You might have a vehicle issue that demands you fix it.
Spending then on that web enhancement or image makeover or brochure or desk or
telephone or similar could jeopardise the fixing a more vital piece of equipment that
went wrong without warning and this cannot be allowed to happen. Commit to
earning not spending.
It’s not just about controlling money, it’s more abut managing money. Think about
your business and money in all areas…holistically view all aspects of business cash
transactions. Think about stock levels. Manage money closely and make more effort
with drop shipping or promise delivery in 48hrs not ex stock so that your cash isn’t
tied up. Don’t immediately commit to paying the old terms or buying the usual
amount. Make a more informed decision and make your money work for you.
Don’t commit to larger orders when tempted with another level of discounting, buy
what you need and keep your cash free.
Think about sourcing new suppliers possibly from a foreign supply such as Asia or
Eastern Europe. Whilst it may not be your first choice maybe upon close inspection
items can be purchased that are as good when you really look around.
Think about buying slightly narrower range of product, only stock those that sell
quickly not all of those that might be called ‘popular’. Don’t splash out on staff
incentives instead spend time with them educating them as to some of the more
private side of running a business so that they don’t think you are just being mean.
So, as an exercise, have a quick look at all of the items on your ‘wish list’ eg new
software for artwork creation or a new photocopier or similar and then honestly ask
“If I had to manage without this for another 3 months what exactly would be the
impact? What might be the consequences? What else might have to be sacrificed if I
didn’t buy it? Or, if I did buy it anyway, what might be the knock on effect if then
something else broke down? (time to learn, other items that cannot be bought ). Very
often we work ourselves into a state where we imagine the worst and push ourselves
to spend when reality is it isn’t that urgent. Controlling spending when the cash flow
is tighter coming in needs a little more discipline but rarely means suffering.
Then as an exercise add another level…
Try calculating the absolute total amount that you could spend or would normally
spend if there were absolutely no restrictions whatsoever. Imagine that you were able
to buy what you wanted and it wasn’t cash that stopped you this month…(in a normal
working environment it is quite possible that you couldn’t find enough time to go out
shopping for all that you want anyway so actually time restrictions because of work
load are more of a factor than cash to spend)…but just try calculating what you might
spend if you could just go out spending.
Ok, now you have that figure…
What is the average sale worth to you? What is the average deal value?
Ok, so now, how many average deals do you need to cover all of that total spending
wish?
My guess is that actually your whole wish list is possible to be bought for only a few
thousand pounds and your average sale value is almost enough with just a couple of
sales!! Probably only 2 or 3 at a maximum are needed to furnish all of that wish list!!
And so controlling spending fades into significance when you compare with the
magic of focussing on a few extra sales. Push for 3 more and spend all that you like!!
