The Grapevine

Cost Cutting Done Right

April 16th, 2013

One of the easiest ways to increase your profits is to cut your costs. But cutting costs can be a, ahem, two-edged sword.[level-members]

You don’t want your customer experience or your marketing reach to suffer. You do want to minimize expenses on anything that doesn’t directly contribute to keeping current customers happy and attracting new customers.

Let’s take a look at a few costs we might consider cutting and examine whether they’re good candidates for cutting – and why or why not.

Heat and AC
Clearly your shop has to be comfortable if you want your customers to be happy to be in your shop. Comfort’s a very personal thing, so I wouldn’t necessary make things icebox-cool in summer and sauna-warm in winter, but it’s tough to skimp here and keep your customers happy.

Staff Salary
You get what you pay for. And not paying staff means you won’t even have a chance at the top-tier talent. That can be particularly damaging when you’re not around.

Even worse, not offering appropriate raises and other perks creates the kind of unhappiness that can sneak under the radar, especially in tough economic times when employees may hang on to a job they don’t like long after they’ve stopped being productive.

Again, this not a good place to cut corners, though there is room for creativity. Candidates who lack experience but make up for it with great retail attitude can be excellent choices if you’re willing to invest the time in training them. Process becomes important here, but it can be done.

And cutting staff entirely can be a real cost-saver, as long as you don’t come to hate being in the shop. Burn-out shines through to customers in ways you might not notice at first.

Marketing & Promotions
Everyone’s favorite “discretionary” expense. At first glance, these would seem to be the BEST places to make cuts when times get tough. But viewed from another perspective, tough times might be the best opportunity to build market share: your competition is probably cutting their marketing right at the same time you’re considering doing the same thing.

That said, marketing and promotion is a great opportunity to realize efficiencies. You should be measuring each component of your marketing efforts to identify what is and is not working. Whatever isn’t, you have to fix or forget. Never spend money on marketing that isn’t working.

Hopefully, these three examples give you a sense of the kind of evaluation to apply to your own costs, and a way to decide what to keep and what to cut. [/level-members]