Cutting costs or increasing profits?

A publication editor contacted me this week asking for my input into an article they are thinking of running about what small businesses can do to cut costs. This got me to thinking that business owners should not be focused on cost cutting but rather on increasing profit and improving cash flow.

In good times, and especially in tough times, business owners should always be concerned about costs. Costs need to be analyzed. Vendors need to be negotiated with. The best possible deals need to be made in purchasing energy, paper clips, and inventory.

But a cycle of cutting costs can rapidly pave the road to extinction.

Rather, owners need to concentrate on profitability and positive cash flow. Sure, cutting costs can contribute to both – but for how long? When times are tough, the owner needs to bolster sales and marketing activities – possibly even increasing expenditures of time and money in both areas. Then the fundamental issues need to be addressed, issues such as: improved productivity, customer service, customer satisfaction, and innovative services and products. For survival the owner needs to play to strengths – not weaknesses.

What is your business doing to improve profitability?

Will Limkemann
Siqua Group Limited
440-871-0976
www.siqualtd.com