Cost Management Consulting

Efficient cost management is an integral feature of any small business success story

Competition is the keen cutting edge of business, always shaving away at costs. Henry Ford

Cost management is different from cost reduction. The word “management” implies using available resources efficiently and effectively to accomplish desired goals and objectives. When costs are managed, they are restrained from growing larger than they should.

The process of cost reduction, on the other hand, concerns reducing expenses that are too high. Cost Management is a very different concept from cost reduction.

In terms of business practices, cost management is a much better plan of action. It indicates that your small business costs have not been allowed to grow past a reasonable level than what they are intended to accomplish. There could probably be a lot of debate over which is easier, managing or reducing expenses, but managing your small business costs is always part of a truly successful business.

Cost management is a strategic approach. Cost reduction is a reaction to a problem. To manage costs means small business owners are staying on top of operations and attempting to create the maximum profit margin. Small businesses that must implement a cost reduction plan are solving a problem that might possibly have been avoided if they had a cost management plan in the first place

Every small business will at some point have to reduce it’s business costs. Cutting costs in a running small business can be difficult and it is much easier to keep control of the costs up front. But when times are good, and sales are growing, the focus of small business owners often is on managing the revenue side of the profit and loss. While revenue is being managed, “waste” is developing in the expenses.

A professional business coaches cost management consulting program should follow the principle that you need to understand how to manage costs before you can implement an effective cost reduction program and begin to maintain costs at the competitive level they should be for your small business growth.

Your business coach will do this by:

  • Assessing your small business’ financial health
  • Developing an understanding of what currently drives each business cost
  • Determining whether any costs can be quickly reduced without damaging the business
  • Determining benchmarks for different types of costs
  • Putting together an action plan to achieve cost reductions and maintain ongoing efficient and competitive costs for your small business

If your business profitability is low and cost reductions or implementation of cost management is not going to achieve the desired results within a short time frame, your business coach will tell you that it may be more effective to focus primarily on Sales Improvement in the first instance.

For true small business success a focus on sales and costs is required, but trying to target both at once can often be an overwhelming challenge, so your business coach may look at which are you can gain the most from.