The Basics Steps of Cost Optimization

Cost Optimization, on average we save our clients 10% in operating costs annually through innovative industry best practices – how can we help you?

What is your New Breakeven?

COVID-19 has hit every single business like a sledgehammer this year, disturbing and distracting boards, leader’s, management teams, entire sectors and industries. Every businesses contingency and crisis management pack has been dusted off and pages read vigorously looking for solutions to this unscheduled nine month and still counting financial crisis.

One company owner told me, he told the CEO to write off 2020 and let us pray 2021 gets better sometime soon. It is now time to reflect on learnings from previous financial crisis’s and take out any relevant best practice or mental models that our predecessors used.

Back basics hit me as again and again as a common theme referenced during economic downturns, financial crisis or global recession. This triggers a reflective moment disusing financial cost optimization with Mark, as our CEO he often quotes back this phrase with a smile “simple old-fashioned retail metrics will help business planning and recovery during an economic crisis”. How true this statement is and how relevant it remains today, often followed up by “what is our new breakeven target should this ugly trend continue?!"

Mark a seasoned international CEO, a business specialist in market entry strategy, operating models and business development regularly advises boards, teams and leaders.

Each crisis requires a tailored approach, customer focus and colleague engagement, as our teams need positive encouragement and confidence they will survive and come through this as stronger leader for the experience. Having weathered national economic recessions and studied global slowdowns, similar tactical trends do emerge from the large and smaller business leaders.

The key priority for every business is to mitigate losses and keep the business safe during unprecedented change.

The easiest way to reduce costs is simply stop spending -

• No recruitment.

• No overtime.

• No new stock purchases.

• No travel expenses.

• No training.

• No capex or opex.

• However, some competitors will have planned for these periods of time and are waiting to pick up distressed businesses, locations and steal a march.

• Review all supplier contracts.

• Revisit debt levels, debtors and all financial risks.

• Review essential business associations, subscriptions and conferences.

• Review productivity and loss-making products, services or departments. How can we improve profitability fast?

• Forecast the next six months business demands productivity, sales and costs. Best and worst cases for cashflow, what is each unit’s new breakeven target by day and hour?

Mark is clear – business unit leaders need to forecast sales, costs, margins and costs weekly. What is the new break-even model and are we tracking to achieve it? If not, what actions are we are taking in the next 24 hours to correct and mitigate the financial risks.

Today we may be in the eye of the storm facing into the second wave lockdown or do we have another twelve months of disturbance and economic challenge coming. Now is the time to plan for sales, income, margin growth and take robust steps to controls costs to ensure your business model can survive six, nine or twelve months of disruption and uncertain trading.

Retail Metrics has several powerful solutions and a network of retail practitioners who know how to make it happen.

Click on the link to find out more.