In the dynamic realm of business, I've come to appreciate the art of cost management. Now, more than ever, it's critical to discern how to trim unnecessary expenses and optimise resources strategically. My experiences have taught me the art of making money work harder for both customers and the organisation and how to optimise resources strategically.
Here, I delve into the nuanced difference between Good cost and Bad cost, offering insights into effective financial decision-making.
Good Cost. Bad Cost.
Now is an important time to understand the difference between Good cost and Bad cost. To know how best to remove cost from your organisation and make your money work harder for your customers and for you.
Cost Management vs Cost Cutting
A lot of cost-cutting has been done in the last 12 months. But Cost Cutting and Cost Management are two different strategies that should be understood to improve profitability and growth.
Cost Cutting
Cost cutting simply involves reducing expenses, ideally by eliminating non-essential activities, but most often, it is just an arbitrary STOP on things that seem non-core in the heat of day-to-day trading. Sometimes, when cash is tight, this is the right thing until bank balances start looking healthier.
Cost Management
Cost Management, on the other hand, involves making the best use of resources and processes to achieve your desired outcomes and add value for customers.
While cost-cutting can provide immediate savings, it can have negative impacts on quality, innovation, and customer satisfaction. Cost cutting can be unsustainable and may worsen your product or people’s perception of it, taking away competitive advantage, slowing sales or inbound leads and, ultimately, business growth. And I’ve often seen those costs just come creeping back in future months and years.
A properly run Cost Management exercise, on the other hand, can help align your costs with your goals and customer needs. As well as reducing waste in processes or legacy practices, Cost Management enables you to free up cash to invest in areas that can generate more customers and more revenue, such as marketing, product development, or customer service.
Cost Management in Marketing
Using this strategic approach to cost management enables businesses to invest in key areas such as marketing and, here too, it is important to review supplier and agency contracts to ensure you are extracting maximum value from them. Also, look at your processes, both within the department and how the marketing teams work with other teams across the business to ensure you are working as efficiently as possible. An extra half or day a week freed up from a key team member can add tremendous value and increase that all-important ROI from marketing investment.
Culture of Continuous Improvement
Cost Management also fosters a culture of continuous improvement as your team seeks to eliminate waste and inefficiencies and enhance value creation.
Cost Management can help businesses to optimise their performance, differentiate themselves from competitors, and deliver superior value to customers. The proper implementation of Cost Management can create a better workday with less frustration and less time wasted. And conversely, positive engagement as jobs become more enjoyable and meaningful. Creating a winning culture and significant bottom-line growth.
I have been involved in many of these - both the cost cutting ‘ask’ as well as the proper implementation of Cost Management and have seen for myself how the latter can cause a better working environment for colleagues, less frustration, less waste. And conversely, positive engagement with roles becoming more enjoyable and meaningful. A winning culture and significant bottom line growth.
Want to talk about how this might benefit your business?
I’m always open for a chat to share my experience and lessons learnt along the way. Contact Matthew Gaunt - Connect with Matthew Gaunt.
