Why cost-cutting isn’t always right

Managing costs is a key skill of business owners, right? We hear, with monotonous regularity, that we must look after the pennies allowing the pounds to look after themselves.

Well yes, but also definitely no!


Of course we need to manage costs – strict financial controls are a prerequisite of sound business management, after all. And sensible overheads management gives a sense of control and reassurance.


But there’s a clear distinction between overhead management and cost-cutting. After all, cutting costs is a one-way strategy – once costs are cut to the bone, there’s nowhere else to go. Overheads management does, as the name suggests, manage overheads – keeps an eye on them; making sure the right cost structure is in place for the business.


The traditional growth path of most SMEs dictates that the owner/founder hangs on to many more functions than is sensible, and usually long after the point where it’s become economically unviable. All on the premise that undertaking these tasks oneself saves money, by cutting or avoiding costs.


But is it really saving money?


What if, by spending a little money, it releases the business owner to deliver higher-value work, and therefore more income to the business? Ambitious business owners get used to asking themselves this question – “By undertaking this low-value piece of work, what higher-value work is it stopping me from doing?”


Asking that question usually signposts the right answer, which is to pay someone else to do it for you, freeing you up to do what you’re great at – after all, you set up the business because you’re great at something, right?


What if outsourcing these distracting tasks could be done with confidence? And done to a standard at least as good if not better than your own?


Ascendia – Your growth, managed


Doug Aitken

Doug has been a regional manager for Royal bank of Scotland, set up an successful accountancy network, and launched Ascendia Growth. Knowledge is useful; developing a skill from it even more so; but its making that skill habitual that is the real secret.

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