Cut Costs Not Corners summary

When entrepreneurs found a new business, they’re often prone to overexcitement and might end up spending money they don’t have. While this mistake is a common one, it can seriously cripple a business before it even gets off the ground.

So, it’s key to understand cost management from the start, and a good place to begin is with property.

Do you know what the capital cycle is? Well, it’s essential knowledge for any company owner, because every business abides by it.

Here’s how it works:

Increased productivity is a great way to cut variable costs, but that means convincing your employees to get more done – and we all know this is no easy task. Luckily there’s a great strategy for boosting productivity, and it all relies on motivating your staff through your profit margins instead of their turnover; this gets you on the same side as your workers while increasing your own profits.

In most companies, the sales team is rewarded for sales they make. This structure causes employees to fixate on cutting deals and costs are often left unchained. A better strategy is to link commissions to company profits, thereby focusing your salesforce on saving money and improving the company’s bottom line.

Every growing business is sure to face the challenge of financing costs, and it’s essential to bring these under control before they start eating into your profits.

Financing costs – that is, the cost of raising money – arise due to interest and other fees. It’s important to identify ways to actually obtain money at little or no cost.

If catastrophe strikes your company, cutting costs is likely the first measure you’ll take. Sometimes this can mean making difficult decisions to keep your business afloat, and we all know that extreme times can call for extreme measures.

One such strategy is trading debt for equity, because offloading debt can sometimes be worth an major chunk of your company. For instance, the luggage company Samsonite traded a whopping 60 percent of its shares to CVC Capital Partners, one of Europe’s largest private equity groups, in exchange for the payment of a debt worth nearly $175 million.