Kiley Mutschler, a regional manager with Active Wellness, shares three tips you should follow prior to implementing any cost reduction stratigies.
Cost reduction is a trending topic across many industries as there are looming concerns around the economy both locally and globally. When implementing cost reduction measures, it’s important to ensure you are aligned, set realistic goals and communicate effectively, or you may not achieve the results you’re hoping to gain.
While there are many ways to implement cost reductions across the business, there are also a handful of best practices you should follow prior to implementing any cost cutting measures.
Establish Your Goals
Prior to making any decisions, it’s important to get aligned with your goals for cost reduction. It’s also important to ensure the goals are realistic and achievable within the constraints of your business and service model. In order to achieve the desired results, it’s important that you are specific and detailed, setting timelines and determining how you’re going to measure success.
In conjunction with establishing your goals, it’ll be important to schedule ongoing meetings with the leadership team to evaluate your progress and make adjustments as needed. There are a number of strategies you can explore for establishing your goals depending on the desired outcome, including: elimination of expenses, substitutions for products and/or services, and/or repurposing spaces or resources to maximize profit.
Evaluation of Expenses and Services
As your goals and budgets have been established, the next step is to evaluate your actual business expenses. While we know the cost of labor is likely your highest ticket item, there are many other ways to evaluate expenses before resorting to reduction in force, hours, etc. Although you may find it is necessary to reduce, looking at the highest and/or most “obvious” way to reduce cost is not always the right way to go.
What are the other areas of your business that you spend money on, i.e. technology, consumables, utilities, towels, membership cards, housekeeping, etc.? Work with your team and department heads to pull data and invoices and bring all of those expenses to the table to be evaluated. You may be surprised how making small adjustments in some of these areas can make a big financial impact overall without having to touch the workforce.
Emphasize Productivity
Additionally, are there other areas of your business that you could be more efficient at? While easy to ‘cut’ costs, there may be a way to expand the roles of others and limit the amount of time and resources you are investing in other areas. Would it make sense to reduce the number of meetings throughout the week to allow someone to complete their scope of work in less hours than currently scheduled? To emphasize productivity, create an initiative to make productivity measurable. For example, measuring a trainer’s sessions/day or week or front desk hours to number of sales. You may notice that by emphasizing productivity, you can repurpose the team to reduce expenses and even drive revenue.
Once you have established your goals, completed your analysis and have an action plan to implement your cost reduction strategies, communication will be very important to overall success. Be mindful that transparency to your team and/or your members will help with buy-in and understanding of any changes that need to be made.
Learn as you go and take note of it for future evaluations. Stop and celebrate when you reach your milestones. Most importantly, do what is right even when it is difficult.
