Revenue growth VS cost control

There’s an old dilemma in every business.

Do you focus on controlling costs or building your overall revenue?

An idyllic answer is of course to do both, but that isn’t feasible for most businesses as they move through growth and consolidation cycles. This is completely natural as with every growth period resources are expended and outgoings need to be brought back into a feasible margin.

For the purpose of this piece, I’d like to focus on the second half of the equation, and one that a lot of operators feel uncomfortable talking about. To put it simply, it’s easier to wax romantic about growing a business than it is to make rolling your sleeves up and getting down to brass tacks look sexy.

But it doesn’t have to be that way.

Without the all important process of finding efficiencies and analysing costs, the business will not have longevity, and this is not a process that will happen naturally.

Having worked with founders, I understand the possessive instinct that comes with building something from the ground up, and the difficulty of having to take a more measured approach to assessing where the road has led you on the journey.

During my career I have had multiple conversations with business owners that they did not enjoy. As an outsider looking in you can see where a lot of fat can be trimmed without compromising the integrity of the business model, but it’s not easy to hear.

However, this is what separates a business that breaks even every quarter from one that consolidates and prepares itself for the next expansion cycle.

Cost consolidation is not a dirty word and it does not directly translate to dropping quality or trimming down your team. Let’s face it, nobody wants to be letting team members go in what is arguably the most dire skills crisis our industry has ever battled. In fact, the magic trick is to consolidate without overt negative impact to the business.

This is where the heavy lifting begins, a full analysis of outgoings, sales patterns, and operational efficiencies.

We have to de-personalise this process in order to be objective, which does not mean losing your identity, more like putting on a different hat for the afternoon. If you do this properly some of the things you’ll find will be confronting and eye-opening.

Then we draw up a list of action items that can address some of these issues and conduct a pro/con analysis with an additional caveat of ranking the actions by impact. Think of it as another kind of return on investment - where will you get the best value for your operation?

When deciding which actions to work on, it pays to always keep in mind the most important and intangible thing about your business.

Your brand. Your “why”.

It’s the hardest thing to build and the easiest thing to lose. Years of hard work and good will can be undone in a matter of days. I have personally seen venues that opened to great fanfare and initially built a fantastic consumer base cheapen themselves and alienate their regulars so quickly that it made everybody’s heads spin.

Impartial guidance can help at every step of the journey, from analysis, to proposing actions, to decision making. It may seem counter-intuitive to let an outsider poke around the inner workings of your business, but that objective opinion and advice can be a very powerful tool for making the right call, at the right time.

Remember, this can be the difference between considering another expansion down the road and barely keeping the doors open.

AK