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Is Cutting Expenses Always The Answer?

By June 14, 2021July 8th, 2021Blog, Cash Management

Running A Business Is Hard

The hard truth about running a business is that you will be doing better in some quarters than others. Some quarters you will be bleeding money. When that happens, a good business owner knows it’s time to start making cuts and changes to stop the bleeding. Or, at the very least, reduce the bleeding so you can survive until a more profitable quarter. But is that always the best idea?

Don’t Panic

When you’re bleeding money, the line between sound business decisions and panic-induced mistakes is razor-thin. It’s easy to talk yourself into cutting virtually anything when you’re struggling. And it’s also easy to forget that you didn’t start paying for any expenses casually. Every expense you have was a decision to help your business grow and be profitable. So instead of panicking and asking yourself, “can I survive without this” ask, “Is this expense accomplishing the task I pay it for?”

A Healthy Diet

Ever hear an athlete or a movie star describe their diet? They talk about eating tons of pasta and bread and meat to get themselves ready to train. That’s because if you’re working out regularly, your body’s calorie requirement increases. You’re burning energy, after all. At a certain point, getting into better shape requires stepping up your workout. You can’t progress any further unless you have more energy to burn. And that means eating more calories.

 

Financial Dieting

That same principle applies when your business is bleeding money. As the old saying goes, you’ve got to spend money if you want to make money. Cutting wasteful and inefficient expenses is excellent. It’s the equivalent of cutting out soda or candy. But expenses that make you money are a dangerous thing to cut. Best case scenario, you survive, and your business does worse in the next profitable quarter. If a program is not inefficient, your problem may be that you need to drive up sales.

 Making Tough Calls

As I said, the line between a necessary cut and a panic-induced one is razor-thin when you’re bleeding money. There are not any easy answers to when you should and shouldn’t cut an expense. It’s gonna have to be a judgment call. But make sure that when you make the call to cut an expense, you know what you’re giving up with it.

 

To watch my full video, click below!

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