How are you coping with the Global Economic Crunch?
Early this morning, I receive a report on my stocks investment and it shows that my portfolio has lost 75% of the capital invested. I was not surprise about the report, but I was not happy either. Every businessman desires to make profit and increase wealth. Unfortunately, the global economic crisis is making it harder to realize the dream. I often hear some entrepreneurs, both big and small making statements such as “I’m fed up; I think I’m just going to quit”. Well, that is a wrong attitude. I see the present situation as a challenge that needs to be overcome, period. Remember there can be no champion without contest. So, now is actually the best time to show the world the stuff you have inside. This is the best time to become a successful entrepreneur.
While pondering about the stock report in my head, I decided to continue reading my emails (I’ve abandoned the box for about two days now). Next in line was a newsletter from E-Myth which talks about Reducing Operating Expenses. I was excited because that is part of my organizational goal for the first quarter 2009. So, I was glad to read the newsletter. Well, I did not learn anything new, but I was reminded of some crucial things that every entrepreneur must not forget when attempting to reduce operating expenses.
While reducing operating expenses is a good goal, there are few constrains that must be considered. You must ask yourself the following questions before implementing any Cost Reduction Strategy no matter how lofty the idea may be.
Will this strategy reduce my ability to compete effectively in the market?
It will be wrong to cut down operating expenses such that you are now placed at a disadvantaged position. That will be turning over the market to your competitors. This point is crucial.
Will this strategy reduce the quality of my product or service?
Whatever you do, never reduce the value you offer the end-user of your products or services. Never assume they are not smart enough to notice a little change. They sure will, and you will simply end up losing them. If your consumers will feel cheated then don’t do it.
Whatever you do, protect your name and integrity.
Remember that it takes a long time to build business reputation or Goodwill with clients. So, don’t mortgage it just because you want to save a few dollar.
Naturally, the next question that comes to mind is What are the areas that I can actually reduce cost? That is not an easy question to answer as it actually depends on the type of business you do and the kind of operational expenses that you incur. However, a little brainstorming with your team members will bring up ideas that can be examined.
I will conclude with an example. A close friend told me that one of the area his organization is planning to reduce operating expenses is by using Open Source Software for their administrative tasks. Instead of investing in expensive commercial software, they are working on implementing Open Source Alternatives. Well, time will tell if this is a good decision or not. But the good news is that, their customers will hardly notice the change since the organization is a manufacturing company. Their production facilities are purely mechanically driven, so there will be no effect whatsoever on the quality of their products. By the way, if you are thinking of getting Open Source Alternatives, John Perez has some recommendations in his article Best Alternatives To Your Enterprise.
If you have ideas to share please drop them in the comment section, it will add value to this discussion. You can get future updates to this article for by subscribing to Nigerian Entrepreneur RSS. Subscription is free. See you at the top.