What’s The Cost?

The true costs of not doing certain activities are harder to measure than the costs of actually doing an activity. 

It’s why it’s so easy to make cuts in your business and so much harder to commit to new spending and investment.

Seth Godin summed it up nicely in his blog, The Timing Of Side Effects:

“Loosen the constraints on a system and the system will almost always do better in the short run.

That’s if we define better as the visible outputs of what the system does. And short run as, “the stuff that happens before we have to live with the side effects.”

“So… if you remove environmental regulation from a factory, it will probably make more stuff faster. For a while. But then the river is sludge and the workers are dead, so in the long run, not so much.

If you stop paying taxes, you’ll have more money today. But the civilization you depend on to enjoy that money will soon disappear.”

The same principle applies to your business. 

If the advisers in your firm can all just do it their way, work will get out the door faster and probably lead to a short term increase in revenue. But you might find yourself terminally non-compliant and out of business in the long run.

If the leaders of the business don’t meet every week to solve issues and stay focused, you’ll probably get more of the tasks on your to-do list done. But you might find yourself 5 years down the road with many of your current problems still firmly entrenched.  

If you don’t invest time and money in training and developing the people in your organisation, you will certainly improve profitability in the short run. But you might not be able to 2x, 3x or 10x your business like some of your rivals. 

An old MBA lecturer said, “Don’t let the accountants run the company”. Whilst that’s a bit harsh on some good friends of mine who are accountants, what he went on to say was that in larger organisations the accountants’ answer for everything is to simply cut costs.

Simply reducing staff numbers or slashing budgets will have a positive impact in the short term, but at what longer-term cost?

If your customer service standards take a nosedive as a result, it will take time for that to show up in your results; but show up it will. And it might even be terminal. Does that sound like good business?

If your marketing spend is reduced it will make the short term P&L look better. But at what cost? 

In 6-12 months time, when lead flow is reducing, what do you do then? 

To re-establish a marketing effort will take time, probably cost even more money than was being spent previously, because it takes huge effort to build momentum, and will also have some lead-time before it starts to generate results. 

Once again the results could be anywhere from very painful, right through to terminal for your business. 

As I said at the start of this blog, the true costs of not doing certain activities are harder to measure than the costs of actually doing an activity. This we know.

However, smart business owners realise that “not everything that can be counted counts, and not everything that counts can be counted.” (Source: William Bruce Cameron)

Instead of looking at what you can shortcut, or trim, why not look at what you might need to excel at to attract a never-ending supply of great clients?

It changes everything.

Here are a few areas to focus on for starters:

1. Strategic thinking – the ability to evaluate the problem you want to solve, the people you want to solve it for, and to create an organisation that lives solely to get better at doing it.

2. Execution skill – taking your strategic vision and bringing it to life, one small step at a time.

3. Team building, development and retention – assembling the best group of people you can find, who can function effectively as a team, to deliver amazing outcomes for your clients.

4. Marketing and communication – spreading the word about what you do, who you do it for, and why it’s great, so that others might join your gang.

5. Financial management – forecasting, budgeting, and investing to ensure the long-term sustainability of your business creation, so that it can continue to help your target market forever.

What are you not measuring that might be having an impact on the success and sustainability of your business?

“Profit is a consequence of what we do well; it should never become a goal.”

~ Bernard Arnault, CEO of LVMH

What was this blog worth to you? Now multiply that by about 50.  That’s the value of signing up to my weekly blog.  Fantastic content delivered straight to your inbox. (you can unsubscribe any time, we won’t be offended, but I don’t think you’ll want to)