The Coronavirus health epidemic has already cost the stock market billions, and it’s now impacting governments, retailers, and other businesses that are shutting down to help prevent the contagion. While some of these closures are mandatory, others are due to cost-concerns in a rapidly contracting economy – and driven in many cases by a quick-fix approach to cost-cutting. While this may seem like a logical decision, can you really shrink your way to growth?
General Motors is an example of what happens when you try this: in the early 20th century, GM sold 50% of all vehicles owned in America, but by 1988 that number had fallen to only 15%. What happened to them? The short answer is cost-cutting – and it’s not good. Engage a virtual assistant and get the leverage you to stay afloat by scheduling your Double My Business Strategy Session now!
In 1974, GM’s new CEO, Thomas Murphy questioned the company’s strategy in selling cars with different features and suggested that they sell basically the same kind of vehicle with different external accessories. He did this to reduce costs. Consumers didn’t like this, and GM’s market share began to slide – and it’s been falling ever since.
In a recent conversation we had with Mike Michalowicz, author of Profit First, he said: “Cut the fat and not the muscle.” In the case of General Motors, cost-cutting cut too much muscle, and in the end, it cost them a lot of business affecting thousands of people and their livelihoods.
The Fat In Your Business
Businesses generally have two types of costs that can be categorized as muscle and fat. The fat is where you find costs that do not produce any revenue for your business. They are costs you incur in your business that have no quantifiable benefits. The muscle, on the other hand, would be those costs that have a tangible benefit to your business. How do you know if a specific cost has a quantifiable benefit and is not fat, but actually muscle? It can be tricky because you can make excuses and justify the cost or the expense for something. For example, if you decide to rent extravagantly expensive and beautiful office space. You can justify in your head that you need this because when potential clients come into your office, they will see how awesome it is, and will, in turn, want to do business with you, when in fact it is simply a way to relieve and serve your ego since potential clients rarely come to your office anyway.
The Muscle In Your Business
Muscle is something that drives benefit to your business. So for example, if you have a staff of 15 people, and you are thinking, “I need to cut down my workforce because they are costing my business too much money.” Assess your workforce and think again. “Person A” takes care of all your Transaction Coordination so if you cut them, what would happen to that area of the business? “Person B” does all your prospecting, what would happen to your leads without them? Your team members are an example of the muscle in your business. These are the costs that provide support or take action on tasks that drive revenue for your business. When you cut a cost that compromises your ability to serve your clientele and bring you business, then you are cutting the muscle.
Survival Requires Both Cutting Fat & Building Muscle!
Survival in today’s shifting market is about more than simply cutting costs: you need to retain your competitive advantage & hold steady and carefully your business assess costs and expected benefits. During an economic contraction, hiring a Virtual Assistant is a highly valuable way to keep your labor supply intact, while ensuring you have the freedom & flexibility to focus your own efforts on the on revenue productive aspects of your business. In other words, cutting the fat goes beyond simply financial savings: it also means cutting the waste from your schedule and leveraging your skillset on the highest dollar-productive activities you’re able to.
A shifting market can mean the end of a business if you stick to the old traditional ways of thinking. Shift your perspective and the way you think as well. By doing this, you set yourself up not just to survive but to thrive amidst the shift and everything it may bring.
Let MyOutDesk bring you more muscle! Leverage a MyOutDesk Virtual assistant, schedule a Double My Business Strategy Session today, and having a discussion about how to make your business stronger in the midst of this market shift.