Here’s the scenario: Your company fell short on sales goals and top-line revenue is way down. Your expenses are greater than your earnings. It’s time for some tough financial decisions, and the most obvious choice is to cut expenses. But is it the right choice?
From a financial perspective, making cuts can be a good thing if they part of a long-term growth strategy, but making cuts to achieve short-term profitability is a huge mistake!
- Random cuts can hamper long-term sales objectives. Business-to-business sales cycles are typically 3-9 months or more, meaning efforts now will not produce results for some time. If cuts affect those efforts, in 3-9 months your company will not see the payoff from them.
- More with less is a lie! Certain tasks need to be done, no matter how many employees you have. If you cut positions and shift those responsibilities on people who are already overworked, or under-qualified to complete them effectively, the result could be lower worker moral, higher turnover, missed sales opportunities or a host of other negative consequences.
- Expenses are not always expenses. Often they are investments. We’ve seen this a lot. Companies hire firms like the Vx Group to lead sales and marketing efforts, but even though those efforts produce results they are viewed as expenses that can be cut while traditional employee costs are a normal cost of doing business – even if those employees are underperforming.
- Research and development comes to a halt. Markets evolve and customer needs change, and without research and development you won’t keep up.
- There’s a short in short-term for a reason. Profits are realized over time through hard work, marketing efforts, sales strategies and so on. Personnel, marketing, technology and other expense cuts may make your company look good on paper now, but your victory will likely be short lived.
Managing expenses is a natural part of business, but there’s a right way and a wrong way. The better solution is a long-term sales strategy. That’s something we can assist with.