The owner of a growing business can quickly lose sight of the day-to-day costs of doing business that has fallen under the control of others.
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Costs to a business can be monetary valuation, effort, material, resources, time and utilities consumed, risks incurred and opportunity forgone in production and delivery of a good or service.
Partner in Charge Agnes Vacca, from KPMG Enterprise, says it’s fundamentally important for a business to measure the complete cost of every decision.
“If you throw certain resources at a competitive market without doing your research the cost to the business in money, labour, risk, time and reputation could be greater than doing nothing,” she says.
Vacca says sometimes controlling costs to ensure a growing business remains viable can come from a company understanding its vulnerabilities and changing the way it operates to stay lean and efficient.
“Just because a business is growing doesn’t necessarily mean that lots more people need to be employed,” she says.
“It is also very important to employ people with the right skills and experience in all areas of the business and to plan for attrition and succession.
“Not having the right people in critical roles can also be very costly. It is very common in a growing business to see long standing loyal employees in critical roles, which have outgrown their skills.
“They are usually very committed people doing their best, but eventually the job requirements exceed their skillset. It is important to know when this has happened and employ a more appropriate resource.”
Vacca recalls the case of a company IT administrator who inadvertently held a company back from growth.
“The company thrived in its early years and grew from a very small to quite a large business today,” she says.
“The person who we discovered oversaw the IT had been doing it since the company started 20 years earlier. As the business grew, the person moved into the IT manager role, despite having no formal IT qualifications.
“As a result, the business fell dangerously behind its competitors with up-to-date IT builds and other comparable services.
“When the issue was identified, a very well qualified chief information officer was appointed who promptly recognised the discrepancies and got the company back on track, and even ahead of its competitors again. It wasn’t the fault of the person in the role – it’s about reviewing who is doing those jobs.”
Six simple cost-saving measures
- Consolidate your purchases and negotiate better pricing
- Get vendors to compete for your business
- Review your vendors regularly
- Train your staff to ask for and get discounts
- Wherever possible, make expenses variable versus fixed
- Cultivate fiscal discipline as a core company value.
