There's a British saying that I just love: being penny wise and pound foolish. Basically, it means scrimping and saving yourself small amounts of money, while wasting much larger sums. And it's ridiculously easy to do. We may feel virtuous by trimming some of our business expenses, but what we may not realize is that we may end up regretting it down the line, either when we encounter unexpected costs or a reduction in revenue. Here are a few types of cost savings that may not be as wise as you'd initially think. (Trust me, some of these lessons I've learned the hard way.)
1. Doing anything that affects quality to customers.
If you own an Italian restaurant and decide to trim expenses by switching from pricey to regular tomatoes, you know your customers are going to notice.
The first question you may want to ask yourself when you're looking for cost savings is “Will my customers notice?" Anything that negatively affects your finished product or service can have disastrous effects. Make sure you preserve what makes you fantastic.
2. Cutting staff.
I know, I know… Payroll is expensive. But you know what's more expensive? Losing customers because they can't get timely, effective service.
Sure, the evolving nature of work and our workplaces will sometimes warrant downsizing your staff, but be careful! The last thing you want is to cut staff in a way that hinders your ability to continue running your business effectively. Paring down your staff to the bare minimum is one of the types of cost savings that may end up costing you both customers and revenue.
3. Doing everything yourself.
I'm all for rolling up your sleeves and pitching in wherever necessary. But when you're the captain of your ship, you have to be thoughtful. After all, if you're shoveling coal into the engine, then who's steering the ship?
While you can cut corners and costs by tackling tasks yourself, make sure you leave yourself enough time and energy for the work only you can accomplish—the planning and vision that led you to start your own company. Don't wear yourself out with minutiae by focusing on the types of cost savings that don't take into account the big picture of your company.
4. Working too much.
Just like trying to do everything yourself, there's a point at which working crazy long hours becomes an investment with diminishing returns.
If you're too wiped out to fire up your creative engine, then you're probably working too hard. Taking a little time to recharge can be the wisest option. That break can help you get more out of the time you actually spend working.
5. Ignoring social media.
I don't care whether you own a restaurant, an accounting firm or a construction company… Harnessing the power of social media is valuable.
Yes, it takes a little time. Yes, you may need to pay someone to handle it for you if you're technology-averse or crazy busy. But if you're trying to cut costs by writing off "silly old" Facebook, you may be missing a chance to connect with your customers in a way that feels both fun and comfortable for them.
6. Cutting your marketing budget.
Again, no matter what industry you're in, marketing is important. Customer attrition is simply a part of doing business. When you stop trying to replace the customers you lose, you could be posing a real threat to your revenue.
You must—whether you invest actual dollars or simply time—tend to your company's marketing. Cutting your marketing budget can be one of those types of cost savings that ends up backfiring in a big way.
We're all trying to do more with less every single day, and I'm actually a big fan of constant vigilance over expenses. It's so easy to let recurring costs or occasional expenses eat into our bottom line that we must look for ways to pare down our expenses. But we can't do it at the risk of our revenue.
It's not always easy to predict all of the outcomes for every decision you make. You may not discover until six months down the line that changing the kind of paper you use to print customers' wedding invitations resulted in fewer referrals. It make take a year to learn that neglecting your Facebook and Instagram pages has hurt the number of new visitors to your company's website.
While none of us can predict the future, it is smart to think through the negative consequences from implementing the types of cost savings that can ultimately hurt you in the long term.
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