When the economy is going through difficult or uncertain times, companies often look for ways to weather the storm. One way to strengthen your business’s financial position is to “run lean.”
But what does it mean to run a lean company? Does it mean doing away with anything frivolous and operating on a bare-bones staff? That might be the way the concept is interpreted by some, but the underlying philosophy is much more adaptable.
At its heart, running a lean company means that you eliminate anything that doesn’t provide value. You must determine whether being fully staffed with full-time employees provides value. You also need to decide whether major expenses are providing enough value to justify the spending.
And just because something is working well doesn’t mean you can’t improve it. By either lowering the dollar amount of the expense or maximizing efficiency, your company can be leaner and more efficient. Here are a few areas where you can apply those priorities.
1. Cut Overhead Without Overworking Your Team
The concept of making cuts to your team often carries a very negative connotation. Images of employees fretting about who is going to be let go next might come to mind. In such cases, the workload stays the same and overwhelms the much-reduced workforce. It’s the last heaving gasps of a dying company where the straggling employees bear the brunt of the business’s compounding failures.
Dramatics aside, cutting overhead doesn’t necessarily translate to being miserly with your workers’ well-being. Even when the economy is tough, that’s generally not a recipe for long-term success. Sometimes running lean is a matter of adapting your team to allow more flexibility for both how they function and how you hire.
Creating remote work options is one way to cut overhead in a sustainable way. With remote workers, you’re no longer limited to the talent pool in your local area. You can find more qualified individuals or workers who live in areas with a lower cost of living. Those who live in less expensive locations would potentially do the same job for far less than local applicants.
You can even go beyond crossing state lines in your employee search. It’s relatively simple to search and find remote workers from other countries. With international hires, however, there are some additional considerations. For one thing, it’s illegal for companies to hire anyone from a country in which they have no physical presence.
So does that mean you need to set up a storefront in Germany just to onboard a worker who lives in Stuttgart? It’s an option, but you’d likely be better served by engaging an employer of record. An EOR is an HR services provider that has the required presence in your country of choice and can hire employees on your behalf. Not only that, but they deal with national and local hiring regulations to ensure compliance.
Having a portion of your workforce operates on a fully or partially remote basis can also reduce office space costs. If fewer people come into the office on any given workday, you can potentially reduce your square footage.
2. Minimize Redundancy
There are a few areas where redundancy procedures serve as a safeguard. Neglecting those backup systems and supports to save a dribble of money is shortsighted and risky. An extreme example is if a $50 million company only has one available credit card to use for expenses. Sure, the company might save $95 a year in annual fees, but it could be disastrous if the sole credit card stops working.
So yes, a certain amount of redundancy is necessary for a stable business. In other areas, redundancy just means wasted money and resources. The trick is finding where you’re duplicating processes or assets and eliminating those without affecting functionality.
One major offender in redundancy is software. With so many advancements and so much competition between creators, the options can seem overwhelming. Not only that, but some apps have numerous capabilities apart from their main functions. That can lead to overlapping programs and bloat.
For example, a modern advertising agency is likely to use project management software to track its marketing campaigns. They also might use an email tracking system to verify whether emails have been opened or not. The company could go on that way for years, paying two seemingly necessary subscriptions every month.
But what if the project management software also has a function that allows employees to email directly? And what if emails sent through that software are tracked? In that instance, there might be redundancy in software, and the tracking app could be eliminated.
3. Assess Value Regularly
Most things in life change or advance. Your business processes or activities are no exception. You need to check in regularly to make sure what you’re doing still yields the same or better results as in the past.
An external aspect to consider is client expectations. If your business has typically dealt with a certain demographic year after year, you might know what they value. A new demographic, however, may want something quite different from you.
If you run an accounting firm, you might do most of your work electronically but still send out hard-copy invoices every month. Your older clients likely expect to receive hard copies. If you experience significant turnover and find your older clients being replaced with a younger generation, though, take notice.
Younger clients likely won’t appreciate being sent hard copy invoices since it’s more likely they use electronic banking. It could also reflect poorly on your firm, as your new clients may see it as a sign that your practices are outdated. In that case, you might consider eliminating hard copies. Doing so would reduce printing costs, envelope-stuffing time, and physical space needs.
Lean Needn’t Be Mean
When economic times get tough, cutting expenses becomes more of a priority. To make sure those cuts don’t negatively impact your overall operations, look at value versus dollars. Doing so will allow you to improve your bottom line, but not at the expense of necessities — or your employees.