Welcome to the Business Abundance Podcast, providing
the tools and knowledge to help small business
owners succeed. For additional resources, visit
www .businessabundance .online. Welcome back
to the Business Abundance Podcast. During today's
discussion, we will discuss cost -cutting in
business and whether it is the best solution
to address profitability. That was the happiest
version of cost -cutting. Usually people are
like, oh, I've got to cut costs. It's like, ah.
Let's cut some costs today. You can change anything
with a smile. We're cutting costs today. You're
fired. Oh dear. You'd always feel good, wouldn't
you? I've just been fired, but I don't know why
I'm smiling. This is the worst day of my life.
Cutting costs is fun. Exactly. Rowan, you're
going to discuss the value of today's episode.
Oh, the value. OK, so today we're going to learn
about cutting costs. A lot of people love to
cut costs. Cut corners, cut costs. We're losing
money, we're not making enough money, let's cut
some costs. But it's probably not the way that
I think business should be done. And we'll talk
a little bit about that today. It might be a
bit of a polarizing view, it might not, but I
think it makes a bit of sense. So what are we
going to learn out today? We're going to look
at cutting costs and maybe managing costs and
the difference between the two. One's important,
one's certainly not. What effect? cutting costs
can have in the short term and the long term
and why that might be a good or a bad idea. And
then we're definitely going to look on, well,
if you do need to cut costs and that's your problem,
you're not making enough money, you've run out
of money, there's nothing there and you've just
got to cut, cut, cut. Well, what should you be
looking at instead? Okay. So what is cost cutting?
Cost cutting. Pretty simple. We have this cost,
we have this, we're going to cut it down. I'm
gonna go out on a limited sayings, cutting costs.
Yeah, so cutting costs, what does that mean?
If you're in a restaurant, let's have some examples
of cutting costs in a restaurant. Maybe you choose
to use a cheaper alternative to a product that
you would usually use, like different ingredients.
So we're gonna use third grade beef mince instead
of, oh, I feel it's steak. It's probably a bit
extreme. Yeah. I was at Costco actually a few
weeks ago on a trip to Melbourne and I went to
order a burger, right? And they don't offer lettuce
anymore on their burgers because apparently lettuce
is too expensive now. Thank you to all the, you
know, vegetable inflation. Do they replace it
with anything? We just have a meat and cheese
burger. Coleslaw. Coleslaw. Coleslaw to me is
like a side that you put on the side of something
not that you have in a burger. But yeah. Yeah.
So for me, that's actually really cool because
I found out recently I was highly allergic to
lettuce, which I may have mentioned. I may not
have. It's a joke around here, but I didn't believe
him. Coleslaw. Love it. No, I didn't believe
you when you first told me. We were out getting
a burger maybe. somewhere local and, oh yeah,
no lettuce. I'm like, what are you going to get
us lettuce? I'm allergic. No one's allergic to
lettuce. It doesn't happen. I'm really allergic
to lettuce. Lettuce is like 90 % water. Yeah.
And it's the two types that have the most water.
Coles and iceberg. But there was a restaurant
that I go to quite often and they just kept putting
splice full little amounts on the top every time
I asked. And eventually she came in, I picked
it off in front of her and she said, just eat
your lettuce. I'm like, no, I'm allergic. I had
to show off my allergy test. I think she felt
really bad. No one believes you, do they? No.
But anyway, so yeah, that's an example. And I've
now gone, okay, well, here's a cool burger that
everyone likes, and let's take a pita out. And
maybe it's coleslaw is just as good, or maybe
it changes 100 % what the burger tastes like
now. What other examples, cutting costs in a
restaurant, that's a really easy one to look
at. Stupid place where I go to lunch, nine times
out of 10, they've got this pesto, chicken pesto
salad. Yes. Premade. Didn't tell us. Didn't change
price. Took the chicken out. Pretty big change.
I can't wait to get into my chicken pesto pasta.
This is going to be awesome. Where the bloody
hell's the chicken? Oh yeah, we had to get rid
of the chicken. Sorry about that. Could have
told me. Hit me head in. On that too, my mum's
a celiac, so she can't have any gluten in any
of her foods. And so we would always gravitate
to these regular brands that we always buy. And
all of a sudden, this one particular brand just
stopped making their products gluten free. Same
packaging. What could possibly go wrong? Same
packaging. Everything. No like message on the
front of it saying, hey, we're not gluten free
anymore. Same price. Gluten free price. And yeah,
no, it wasn't gluten free anymore. And we didn't
realise until we read the back of it. How do
you feel about that brand now? We don't go to
that brand anymore. We don't purchase it anymore.
Like, if she had have eaten that, she could have
been really, really sick. Yeah, there's another
place around here that I don't really go to,
but the Veggies is a Thai place and it's all
crinkle cut. Then some of the work they just
mentioned that they... I said, it's really familiar,
like the Veggies have a bit of a strange taste.
And I said, they're pretty familiar. It's like,
oh, it's because we get them from the coals frozen
section and pre -cut. And it was literally, it
was the coals, like the coals mixed Veggies.
Boom, that was the one. And they're just serving
it up for their $35 meals with water. You know,
that's cutting costs from a food perspective.
But then in other businesses, what have you got?
You've got staff costs, so wages, so we can cut
wages, we can cut entitlements, we can cut perks.
We can outsource. We can outsource, yeah. So
that's cutting your costs. It's a pretty controversial
one at the moment. Yeah, true, true. Very controversial.
I think we've got a few stories today, don't
we? A lot of businesses will try to do it themselves.
Yep. which is a recipe for disaster. I only got
so much time. Yeah, 100%. And then you've got
services, advertising, branding. I've seen a
few logos that are definitely homemade in my
time. Yep. Good old Paint Shop Pro special. So
yeah, there's lots of areas that we can. I think
like Ian said, cutting costs is pretty straightforward.
There's a lot of areas and a lot of things you
can cut, but that's probably not what we're talking
about today. Yeah. So why would a business need
to cut costs in the first place? Don't have enough
money. So generally it comes from a, it's pretty
rare you've got a business that's just literally
wasting money, giving it to all these places
that they don't need for no reason. But fundamentally,
if anyone wants to cut costs, it's because they
don't have enough money and they're worried about
what's gonna happen. They've got some bills they
need to pay, which might be staff wages. It might
be financial repayments. It might be enough material
so they can do the next job. And then they're
just looking at these other things coming out
of the business every month or every quarter
or, you know, this, this, this, this. And it's
not getting them anything or they don't see the
value in it. And so they go, right, let's chop
them off. Gone. Easy to make more money, in my
experience. Yeah. After the cutting costs. So
why do you think that businesses automatically...
Just think, you know, we need to cut costs now
rather than just trying to increase their profit
to begin with. I think there's a stigma there
that it's harder to make more money, especially
if you're doing what you've always done and it's
not working. Oh, that's a good point. If I've
always done it this way and it's not working
anymore. Oh no, the market's changed. I'm going
to have to fire you. Sorry. That sounds familiar.
I think we already had a podcast on that. Yeah.
You know, it's 100 % true. That's the mindset.
Yep. Yeah. XYZ business is not going well. They
haven't changed. I'm not quite sure why. The
market's gone. They don't have a community behind
them anymore because they're offering something
people don't want. They don't want to listen.
They haven't listened to their community. Yeah,
it's all about them. And so now we're just going
to cut costs because my business model doesn't
sustain it anymore. That's one reason. But then
another reason too is it's mainly for much larger
organizations. Big businesses, especially share
market listed ones, new CEO comes in, what's
their target? Net profit for the shareholders.
How much dividends can we get? So what do they
do? They come in, they cut as many costs as they
can. Boom, boom, boom, boom, boom. Short term,
one year, two year, three year maybe. Net profits
through the roof, they get huge bonuses, share
options look like a hero and then they'll even
go to the next place. Fly, let's fly away. Qantas?
Who will fly to Frank Sinatra? That's actually
not a bad tune. How do we segue on to Frank Sinatra?
Oh, that's right, because I'm a horrible singer.
Yeah, so we've all heard stories about different
businesses throughout the years, but that's,
you know, that's probably is a reason it's not
always going bad sometimes if someone wants to
make themselves look really good in the short
term gain. Yeah, so there's going back to our
little flying segue. There's a business that's
been in the news a lot lately. Qantas? Yeah,
let's not name them. We're not bad -mouthing
Qantas. We're just talking about our experiences
recently. They've had some challenges. They have?
Yes. They've been in the news, that's true. Yes,
we're going to talk about them? Yeah, we are.
As an example. I flew with them recently. Yeah,
okay. We'll try to support local. Yep. So Qantas
have been around for a while. They're a pretty
well -known airline, generally pretty good service.
They've got their cheaper version Jetstar, which
I always... I swear never to use again. And then
somehow when I look at my next ticket when I'm
boarding a plane, it says Jetstar again, even
though I booked through Qantas each time. It's
getting really frustrating. Yeah, premium service,
known for reliability and getting from point
A to point B. Made famous by Rain Man. Rain Man.
Before my time. Really? Yeah, Rain Man. There
was a character in the movie that just would
only... Didn't want to fly at all because of
airline crashes. Oh, Qantas is safe. Tom Cruise.
True. They had a really good safety record, didn't
they? Yeah. There's no airlines that fly that
haven't crashed, Ray. Qantas, Qantas. I don't
think Qantas fly from Idaho to Newark, Ray. But
anyways, they have a really good reputation for
a pretty premium service. Yeah. And I had an
experience recently which will go through. Briefly.
Yep. And I see you flew to New Zealand. Yes,
I did. How'd that go? It wasn't the best experience
that I've had. I've had some stellar experiences
with Qantas. I don't fly with them a lot. Brand
loyalty to another major airline. Jetstar? Definitely
not. No, it was Tiger. Where'd they go? But I've
had some great experiences with Qantas and you
do feel like you're getting that premium even
when you're buying an economy ticket. Not so
much this time. Not so much. There were a few
hiccups. Let's have a quick short list. OK. Every
flight was late by at least an hour. There was
no communication of the times that the flights
were being rescheduled to. The fella who flew
with me, he had his bags disappear for three
days. That's never good. Luckily it was on the
way home. They would have been really bad on
the way there, wouldn't it? Wouldn't have been
ideal. No. There's a whole heap of touch points
that were quite negative. I feel we're avoidable
in regards to communication, especially the app
itself. You fly now, you get your ticket on your
app and you've got your Qantas app. We're looking
at the app and we're at the bar and we're like,
okay, it's been an hour. Yep. Boarding soon.
Excellent. Flight closed. Ah, mad dash to the
gate in the international lounge at Melbourne.
And everyone still lined up waiting. You just
made us like waste half a beer on top of We've
got airport -price beers as well. Priorities.
Yeah. But I mean, that's 13 bucks each. So again,
it's another negative experience. It's not like
we're struggling for money, but it's still...
Now you've got beer sitting in your guts that
you've just tried to slam back, and you're not
getting the premium experience that you've had
in the past. There was one thing, I think, someone
that was on your trip, they came in for something
the other day, and they said they're allergic
to mushroom, which I thought was funny. Oh, yes.
I picked it. You picked it? Yeah. So what happened?
I got the same meal as him on the flight and
I know he's allergic to mushroom, like deathly
allergic to mushroom. M -m -m -mushroom. I speak
English. Don't worry about it. We understood
what you meant. Exactly. There wasn't mushroom
on the plane. Anyway, I've dove in, he's had
a couple of bites out of his meal and I'm like,
that's weird. I didn't expect to see it. Oh,
that's a mushroom. Oi. That's a mushroom. Don't
eat any more of that. You're gonna die. They
were really good, actually. Their response to
it was fantastic. The flight cabin people were
amazing. Yep. Flight attendants. Yeah, that's
them. I'm trying to avoid gender because, yeah.
Flight attendants can be either or. So it's interesting
because there's like a lot of small little points
there which you don't necessarily think are related
to one particular thing. And like you said, the
people there. was still fantastic. So that hasn't
really changed in all areas. But we went to Queensland
and we booked through Qantas. Then we rocked
up to leave and our flight was, I think it was
delayed. I assume it was delayed. It had been
changed three times in the three months prior
to the price. You're now flying here, you're
flying here. This has changed, this has changed.
Connecting flights changed. It just kept changing.
Anyway, the way there wasn't too bad. I think
we... I assumed we had enough baggage, but we
didn't. So somewhere the communication broke
down there. The person was really good though.
They charged us for three kilos extra when we
had 20 kilo bag extra. So we thought we had an
extra bag. So that was pretty good. You can't
really fault the people side of things. But then
on the way back, there was a bit of a problem
because we were traveling with another party
and we had nine people altogether. And our flight
back had three stages. Basically, we got a message
a few days before saying, hey, your first flight's
changed to 3 o 'clock in the afternoon departure.
You'll be arriving in Brisbane at 6 .30. I don't
know, 3 o 'clock in the afternoon, 4 .30 it would
have been. And our connecting flight left at
1 .30. So, you know, that doesn't make too much
sense. Anyway, so we had to call them and go
through all the processes to change. And they
said, yep, you guys can all fit on this flight
in two parties and you'll get through no problems.
So then they booked half of us on one. And then
they went to book the others and changed our
Qantas app because we were flying Qantas and
we actually were on Qantas this time. And the
Qantas app said, yes, our itinerary has changed,
but we also had our original one. So it said,
yep, your boarding passes are there. You're respected
on this flight. We had the new flight as well,
but it said cancelled. So for our friends, they
were on the flight. Happy days. Ours said we
were cancelled. So then we ran up again. They're
like, I know you're on the flight It's all fine.
I said we can't be right. So we ran up again
and Got someone else because I thought that might
be the issue and they said I know you're not
on that flight It's you don't fit its full So
anyway, 30 minutes later I was on the phone to
this person trying to explain that you know We're
traveling with a baby and then not leaving wasn't
really an option we could have probably stayed
another couple of days, but ideally we want to
go back and They were like, can't you just leave
and then sort it out when you get to Brisbane.
It's like I'm not jumping on a plane, go somewhere
else and not know what happens for the rest of
the day. Just we're going to stay here or we
go. It's two options and they didn't seem to
get that. This person who was probably a lovely
person but it was definitely untrained. Well
I was on the phone to that person. I eventually
got frustrated, hung up and then got a phone
call from the original lady who had figured out
what the problem was when she tried to rebook
and the flight was full when she tried to book
us in and has been frantically trying to fix
it ever since. Which was great great personal
effort and just was really ringing to apologize
and say there's nothing they could do and and
I said Can we just surely there's a flight for
somewhere and then so I googled it and I said
I can book on this flight for two and a half
grand and we can get back via Melbourne One stop
happy days. Can we jump on that? She said, yeah,
what's the flight number? I gave her the flight
number and yep happy days So she put me on Jetstar
on the way back as she's the first thing she
said was can you book that then? I said well
enough to two and a half grand, but can you just
put me on the flight? Because it's your company
She said, oh yeah, no, that's fine. What's the
flight number? When our friends changed to that
flight, they got changed to the Qantas one and
we got changed to the Jetstar one. So we're all
on the Jetstar, but they got all the perks of
Qantas and we didn't. So that was a bit of a
shame. But what happened aside from that, they
lost our heavy bulky items in Melbourne that
we had to pick back up to get to the other plane.
So we had to go to the baggage claim and the
lady there was lovely. She's obviously been in
Qantas for a long time, good customer service.
She's like, I know it's there. I can see it there
on the computer. I know exactly where it will
be sitting. Quote, but ever since they replaced
all our baggage, they sacked all our baggage
handlers and replaced them with a crown, which
I don't know how that works, but that's just
what she said. They're useless. I'm going to
go out there and I'm going to show them exactly
where it is. And she'd already rang them three
times by the stage. I'll be back in five minutes.
And five minutes later, she came out the door
and our stuff. came through the conveyor belt
at the same time. How good is that? So, you know,
Qantas isn't used for a million different reasons,
and I'm not close enough to them to know all
of the reasons, but there's customer service,
which is definitely offshored with some very
limited training, the fact that you need to look
up your own. Run flights and be on the phone
for two hours to solve something pretty simple
and throughout Australia They've got some challenges
with people being sick and limited resources
and things like that, which I understand But
they laid off their entire baggy channeling force.
Yep and replace them with some contracted ones.
I believe So these are things with I've done
to cut costs and it might be required to survive
But at the same time, there's some massive impacts
on their brand massive impacts on the customers,
which I don't they might recover from, they might
not. Internal impacts. I mean, how do you think
the staff are feeling? Oh, that lady, she was
very upset with that man. That's what she said
to me, a customer. That's a pretty familiar feeling,
actually. I worked for a really big super fund
in Australia. And I didn't work for them directly,
but I worked through an outsourced service. So
we did customer service and answer all of the
initial inquiries and questions, just general
advice for that fund. but we weren't actually
employed by that fund. So we had very limited
access to what we were allowed to A, tell the
customers what information we could find out
in terms of their claims, where their claims
were at. So let's say someone had an insurance
claim through their super for income protection.
So they're like unable to work for a long period
of time. We couldn't really get any information
out of like the process of where their claim
was because it was all sitting with yet another
company. that was also outsourced. And so you
were just constantly having to jump through hoop
after hoop after hoop, having to transfer to
get to who you needed to get to. And you weren't
even a customer. Yeah, and that was that was
my experience as an employee. So imagine how
the customer that I was talking to was feeling.
And again, it's just it would have been so much
easier if everyone was all within the same company.
everyone was all completely separate. Yeah, so
I can't remember what the question was or we
just segue into some stories about companies.
But that's some pretty high profile cases and
that's a really good example of how you cut costs
for reasons which might be to save the company,
it might be to increase the profits and get bigger
bonuses, who knows. But you think we'll change
this contract or it's half the price and they're
promising these standards. But at the end of
the day, just because they promise it or can
deliver it or... say they will, it doesn't mean
they will. And who are the people dealing with?
They're dealing with your business. Let's take
it from the perspective of an airline. I mean,
if you're having your confidence eroded in the
airline's customer service for starters and then
their ability to find your bags, how long before
you start going? I probably don't want to fly
with them because maybe they're cutting costs
elsewhere and it's not like you can just park
the plane. From 30 ,000 feet? No, sure. You can
glide down pretty well, but yeah, that safety
thing with Qantas, we're happy to pay double
the price because we know it's safe, we know
we're going to get there, we're going to get
a good service and be comfortable. But now, suddenly
we're paying this price and we're getting treated
worse than. It doesn't take much to erode consumer
confidence. Yep. So there's a couple of big examples
there, but you take that back to some of those
restaurant examples. frozen veggies and we're
putting them $35 and then people are going, gee,
that tastes a bit funny. Like I literally remember
saying, this tastes a bit funny. It's a bit familiar.
And it was exactly what I thought it was. But
you drop that food quality and you still charge
the same. If you drop the... Price of the food
down and maybe the quality goes down, but it
doesn't impact the end result Well, that's actually
fine. That's no worries a value equation hasn't
changed for the consumer But if you're taking
things away, you're taking things away You try
go go up to your partner or go with someone who
we work with give them a pin just say here have
a pin They'll take it off you and then just snatch
it right back out of their hands and walk off
And just gave me a funny look. She's like what
what kind of monster are you but do it? And then
you just turn around and go how did that make
you feel? and they will be upset as. And it's
literally that, here, have this. Oh no, you can't
have it anymore. And that's what all of this
cost cutting is. Bigger businesses can absorb
it better because, let's say, let's use Qantas
as an example, you're not overly spoilt for choice
as a consumer. So people are still going to fly
with Qantas. But a small mum and pop restaurant
using that strategy, I'll just go around the
corner, mate. and you've lost a customer, and
they'll probably tell 10 people. You probably
don't want to go there anymore. That's not gluten
-free anymore. They didn't tell us. Yep, spot
on. And that's where some of those businesses,
it's like a slippery slope. I might be jumping
ahead here, I don't know, but it's a slippery
slope because you cut those costs, that service
level drops down, or the value drops down, and
then you've got less clients again. And then
you're in that position of, oh, we don't have
the people, they don't want to come here anymore.
The conditions aren't what they used to. People
aren't like, they don't want it anymore. And
then you've got to cut more costs. So how are
you ever going to break out of that cycle? Snowball.
Like a good employee, what are they worth? How
long does it take you to train a good employee
who then is an absolute advocate for your brand?
We're cutting costs, sorry. Got to let you go.
And now I'm going to outsource your job. The
person has no idea what your brand is, your core
values. Got rid of thousands upon thousands of
dollars worth of experience. all for the sake
of bottom line this quarter. And don't get us
wrong, if there's another solution that's better
or equal to that's cheaper, that's fine. But
a lot of the time people were looking at the
glossy brochure or this other business did it.
When COVID hit and there was a lot of banks had
huge trouble, I don't know if anyone tried to
get finance or deal with a bank during COVID,
but the waiting times were huge because nothing
could get processed because all their document
management and creation was offshored. along
with a variety of other functions and they literally
got taken out they were not able to work and
that's no fault of those contractors but what
did that mean for the the banks they couldn't
function and they had no control over that and
that was a pretty drastic scenario but had they
had a few more safety nets in place it would
have been a better case so you know if it's more
practical to do something different if there's
a system to automate and put in place that is
better than employee and safer than employee
and more reliable than employee yeah 100 you
do it. Yeah, we're talking a lot about cutting
costs and what the consumer experience is, but
you've got internal costs too. Like we have these
nice little pads with logos on them that don't
look quite pretty. People love to steal them
when they come visit. They're nice pads, they're
not cheap pads. I don't have five of them sitting
at home right now. Took a lot of 10 out for a
client when they came in the other day. But,
you know, people go, gee, that's a bit expensive,
a bit of a waste, but people like them, they
hang around, they sit out there in circulation,
people use them for shopping lists, and people
like them. It's a nice thing they remember about
our business. You know, for our people working
with us, we look at it and, oh, that's ours,
that's nice, that's cool, we've got nice pens.
Business that I used to work for had a really
nice office six different type of biscuits six
or seven different types of drink nice coffee
machine Happy days and they moved office to a
very not nice office with smelled a bit when
someone went toilet There was no tea. There was
no coffees There was one cup to share and no
plates in a microwave. So how did you feel? Yeah
Well, I felt worse for other people in the business
is my position. I was reasonably senior. So I
just took on by myself to either work from home
or take as many coffee breaks as I would normally
would take, but I had to walk to the coffee shop.
So definitely affected productivity. A few people
that weren't working in the office that came
back into the office were very outraged and took
it up as a crusade to get the milk back, which
turns out that tea, coffee and milk is treated
like toilet paper in a business as required by
law to provide for your employees, which makes
sense to me. Still didn't occur. but the people
that had sit at their desks and things, it was
a pretty, they didn't feel very good about it.
I didn't feel very good about it. But, you know,
how do you think the, how do you think people
take it when you cut costs in your business?
Oh, we don't need that anymore. They're not grateful
for it. I was just playing to reread the story
before about the biscuits. We had six different
types and you think, oh, we were smashing them
all the time, but yeah, you did for six months
when you started. And then you realized it was
a really bad idea. And You didn't really often
have a biscuit. It was nice to have the variety.
It was a nice perk, made you feel really good,
but then take it away and it's pretty bad. So,
you know, it's affecting some of these costs
you cut. You don't think they make you money,
but employee satisfaction or even just people's
or clients' views of your business definitely
get impacted. As an employer, you also start
to ask questions, whether you're doing that consciously
or you've just got that gut feeling. Gee, how
long is this job going to last? 100%. That's
a bad question for employers to have. When are
they running out of money and where have they
got no job? I'm normally driving around and now
they're telling me I have to do this from my
office. I've got to cut costs on petrol as well.
How long am I going to be here? Better put the
feelers out. That reminds me of another local
business that I worked for recently. She's like,
how old are you? Not that we're allowed to ask
these questions as employers. I'm nearly 23.
23. How many places? No, you don't have to answer
that. Did you check the resume before you? I
think she's done more stuff than I've done. A
bit of a jack of all trades. So I was working
for this local business and so they're a bit
of a... We won't name this one. No, we won't.
I suppose you could say they're kind of like
a... Let's play a guessing game, everybody. I'll
give you a hint. So they're a dealership. Excellent.
There's only a few. Vehicle dealership. I won't
guess. And they went through a period where they
tried to cut a lot of costs. And this was largely
due to COVID. When COVID hit, everyone just kind
of had a bit of a panic attack and were like,
you know, we need to drastically cut our costs
because we're not selling anything right now.
Yeah, fair enough. Yes. And especially cars.
You need to go out and test drive cars. You're
not going to purchase a car from, you know, the
comfort of your lounge room. Like a lot of other
businesses that have online stores are just doing
fantastically because everyone sitting at home
was like... Great, I'm going to online shop,
that's what I'm going to do. And that three month
period, everything sort of shut down and longer
in some areas, 100%. That was a tough business
to be in car sales. Yeah, absolutely. Right,
so they had that. Yeah, so one of the things
that they did was they moved their used car department
from being across all of their sites to limiting
them to only one site, which cost jobs as well,
because then now, you know, we would have had
used car detailers and we would have had used
car sales people, we would have had you know
administration assistants, all those jobs gone.
All of the extra work now goes to the employers
that are still left at the dealerships that were
retaining those used car yards and so they usually
have you know more cars at their yard but they'd
also have a hell of a lot more work to do. So
they've basically gone we've got multiple sites
and now we're going to send it all to one and
the people at that one site They keep their jobs,
everyone else loses them. Now that people need
to do the work of the extras. Yeah, pretty much.
And then we also had a big empty space. So there's
just a whole empty space where this used car
yard used to be. There aren't enough new cars
now because there's a lot of issues with new
car sources, supply chains. And there will be
for quite a considerable amount of time going
forward. But we can't fill those spaces. They
can't fill those spaces. And so it just looks
empty. And so one of an experience that I had
when I was working there is a lot of customers
that come up and be like, wow, I didn't know
that you guys were still open. Like, are you
closing? When are you closing? And they also
lost a brand as well, which was by choice because
of just completely different operating ways.
They were just moving to a different kind of
style of business. But yeah, so they lost a brand
and they lost their used car yard. And suddenly
they had a completely empty shop front. And so
what they did They thought they were going to
save money by not having to employ as many people
and not operating off of multiple sites, save
money on travel between sites, etc. they're really
lost out in the long run because a lot of people
now think that they're closed and aren't going
to go there and they've lost their reputation.
Or lost a lot of skills when they got rid of
a lot of people too. Yeah and they have a much
higher staff turnover now as well because a lot
of people that would have worked there for you
know 10, 15, 20 years that were just kind of
like let go in an instant were like okay well
a lot of other people that worked there for a
long time have lost their confidence in the business.
That's pretty sad. Nothing looks better than
empty shelves. So much confidence. You look at
that from another point of view and you can go,
well, that makes sense. You know, COVID, you're
not selling anything. You've got to shrink. And
that's fair. Right away, yeah. But, you know,
there were things to do. And I remember advising
people. It's like, okay, well, you can stand
people down. That's okay. You can say, hey, guys,
we can't pay you and we've got no work for you
to do. You're not sacked, but you stood down.
That was valid. And people didn't know what was
going to happen. Then JobKeeper came out for
a lot of these businesses, and I would say car
yards included, a lot of people were buying a
lot more vehicles than before. Getting stock
was hard, but definitely volumes of units did
not go down. They went up. It was still money,
wasn't it? And then a lot of these things as
they went up, people didn't go increase what
they had. They went, oh, we've been operating
okay. And it doesn't look like from the numbers,
from the top end, from the management point of
view, these numbers are still there. Actually,
in fact, they're better. So why would we go back
to how it used to be? So, you know, that's one
way you can look at it. But then you've got people
that are overworked, they're still doing the
same volumes, they're not getting appreciated,
they're getting managed off KPIs and they're
saying, we want more help. We can't provide good
experiences. And I don't know whether that's
something you had or not, but... Absolutely.
So we were having to adhere to our KPIs, you
know, like was our service professional, was
it prompt? Were we great communicators throughout
the day? And it's really hard to be a good communicator
when you don't have the time to communicate to
every single person. You know, you're seeing
upwards of 20 different customers a day, all
with different reasons for coming in. And you're
expected to be able to communicate with them
at least, you know, two, three, four times a
day, times that by 20. And there's only two people
in the office most of the time at an office that
back in the day would have had four or five.
including a full -time manager, which was no
longer an option either. Just for that site,
not for the airlines as well. Yeah, so we had
a part -time manager who was between two sites.
And so you were also losing time to having to
travel between the two as well. So it's an interesting
thing when you look at cutting costs, you know,
it can make your net profit look quite good.
And if that's your measurement, then it does
a really good job. But I would definitely argue
that... you're looking at the wrong thing when
you're cutting the cost. Sometimes, yes, you've
got to cut the cost. You've got too many employees.
It doesn't make sense. 100 % doesn't affect anything
else. Cut the cost. But we're cutting costs to
get rid of admin wage. A few people are going
to work a bit harder. Our service is going to
go down. Well, if that's what you want, that's
fine. If that's your new model. But if that's
not what you want, that's a pretty stupid reason
to do it. You see it with government departments
a lot, depending on who's in power at which time.
Their method of cutting costs is generally retrenchment,
and they will fire people from the lowest paid
jobs, where you could fire three people from
middle management and save the same cost. And
it'd be just as easy to have somebody fill those
spots, whereas you fire 100 people from the bottom
end, you create worse publicity, and you've now
got 100 people looking for work. It just doesn't
make sense to me. Yeah, sometimes wrong measures,
so you don't have the right measures. What else
have we got to talk about? Well, what are some
alternatives? Ah, yes. Make more money. What
else could we do? So yeah, I think we've pretty
well explained why cutting costs is a pretty
bad idea and some really pretty serious examples
there. But fundamentally, people need to cut
costs because they don't have enough money. So
what's the alternative to cutting costs? And
there's two parts to you. Well, it's more than
two parts, profit and loss, but there's two main
parts. There's your expenses and then just your
gross profit. So one's the bottom line, net profit,
what you left over, top line's your income. How
can we get more income? How can we get more profit
before our expenses? And that's some of the things
we look at. We cut costs and we go, oh, it's
gone, gone, gone. But then we're actually reducing
the amount of sales we're going to generate in
the future or the capacity to generate sales.
Sometimes you go, well, there's not expenses
I can cut. these are all good long term but at
the moment I can't afford them and that's where
you need capital in your business sometimes.
Sometimes you need to invest back into your business
because you know well in three years time it's
going to come back to me if I can maintain these
things. But where's that capital going to come
from? Yeah good question. So if you're running
a business and you're just taking all the money
and there's never anything left over at the end
then that's not a very secure place. So you know
I always believe you should have a buffer. People
they go I've got to have paid off my house but
then I've got no money in my business and I'm
not going to be your financial advisor. But that's
not really safe if you have something happening
in your business. What does it mean? You have
to sell your house. If your business is going
really bad and you try to refinance your house,
it's going to be pretty hard because they're
going to look at your income so you don't have
any income. We don't want to take your house
off you, so we're not going to lie on you. But
had you not paid off your house in full and left
a bit of money until you could afford to pay
it off later and left some more money kicking
around for your business, that's one way for
it to come. You can get investors, you can do
other things and maybe some staff. That's all
good if you plan ahead, but if you're in this
position now and you haven't planned that far
ahead, what else can you do? Yeah, good question.
So you cut costs and then you're basically digging
a hole that's going to get bigger and bigger
for you to get out of. So what can you do? You've
got to build the top line. So what can you do
to pivot? And pivot basically means what other
things can we be doing? with our customers, what
are the products and services? So when COVID
hit out, a lot of the clients that I was talking
to was like, hey, what else can we offer at the
moment? Oh, we can offer this, this, this, this,
this, this. Well, let's go do it. Because we
can't do this, this, this. We've got all this
time. We've got all these employees with all
this free time. Let's go nuts. When JobKeeper
came out, some businesses got their employees
back, some didn't. It's like, oh, we don't need
them. So there's no point. Well, you've got all
these employees essentially for free. Well, if
there's 10 people a week that don't have anything
to do, that's a lot of resource to do something
new. Great opportunity. So it's building your
top line. What can we do better? What can we
do for other people? How can we improve this
product? How can we improve this service? How
can we maximise every customer touch point? Yep.
Okay, that person's bought Fuzzy Widget over
here, and there's an ad on sale there that we're
missing out on. Yeah. And if that money's flying,
I mean, COVID's a very unique... And hopefully,
we don't see it again in our lifetime. That's
not the usual reason for this problem. Yeah,
it's a unique challenge. And no one was prepared
for that. And if you were, hats off. But most
of the time, you've seen it coming. Or we're
going to need to cut costs pretty soon. It's
not just going to be tomorrow you wake up and
you've got no money. Exactly. You should have
been a bit aware. It's not that great. Yeah.
And if you haven't, you probably maybe think
about your career choice. Maximise every interaction
and maximise how much value you're offering.
The simple equation is if you're offering more
value than people are paying, they're going to
keep coming back and buying. Correct. Yeah. So
what other products can you offer? What better
experience can you give? Can you do things in
your business that's unrelated to what you do
that make people go, oh, that's just great? Can
you refer people to local businesses that have
a similar, not a competing product, but a companion
sale? talking about community in the previous
podcast, why not be like, well, okay, this guy
over here does a really good stake. We don't
offer stake, but you should go talk to that guy.
And that guy's gonna do the same thing back.
Build those relationships. Yeah, so it's finding
ways to build the top line rather than trying
to cut costs. If you're doing that, you're getting
more customers, which gives you more opportunities.
You're getting more activity, which again gives
you more opportunities. You're forced to find
better ways of doing things, which should avoid
getting stale and getting out of date. And, you
know, in the case of the dealership, so if they
want to get better results for customers, then
what do they need to do? They need to make sure
it's adequately resourced, adequately trained
with an adequate system. If they want the best
financial results, they need to make sure that
it's the minimal resourcing with the minimal
training for the maximum amount of customers
at that level matches. So, you know, looking
at the right thing. But fundamentally, it's building
the top line. And have the conversation. Why
did I start the business? A lot of your answers
will be found in the answer to that question.
Why did I start this in the first place? Because
if you're feeling the stress where you need to
cut costs, you're probably not loving your business
right now. So go back to the basics and say,
what was the reason that I started and reignite
that passion? Because then that's where innovation
will come from. It could be doing a different
business to be fair. It's time for you to move
on. You're wasting business oxygen. Sell it to
someone, close it down and go do something else.
You're hanging on because you've got employees.
It's like a marriage that's hanging on because
of the kids. They're probably hanging on just
to do you a favor. There's a few different reasons
or different things you can do but the other
thing is just ask for help. If your cash flow
is that bad. Go talk to someone that knows about
business or how I'm struggling at the moment.
What do I do? If you go to your accountant, they'll
probably tell you to cut some costs and they'll
look at that sort of stuff because that's what
they do, which is fine if this costs a cut that
aren't good, but just be careful they're not
affecting what you do. But really you need to
look at, okay, well, how can we grow this business?
How can we do something better? What else could
we be doing that we're not doing now? How can
we sort of take this up to the next level? What
do our customers want? And make that happen.
I think that's a key point, Ro, is there are
ways. and sometimes important ways to cut costs.
Like you don't always need the 420 GSM silk business
cards, the top of the range of everything, you
can still get you. I'll argue that. No, it depends
what your business is. Well, as long as you keep
buying them from me, I'm happy. But there are
ways to find a product that can still do the
same job, as long as, as you said, as long as
you're not compromising your core business by
cutting costs. 100%. Cool. So is there any other
advice that you would give to a business that's
maybe struggling to stay afloat? Yeah, if you're
struggling, I would have said this in probably
every episode, but get some help. Like ask someone.
People are more than happy to help other people.
If you've got people that when you say, I'm struggling,
they enjoy it, then they're probably the wrong
people to have around. It's a lot of those people,
but there's a lot of people that want to help
you. So, you know, talk to someone that is successful.
Hey, you know, Have you spoken to someone? Where
did you get help from? What do you do having
these problems? What do you think? Ask your customers,
depending what it is. If it's, hey, we're thinking
about offering some new services. What problems
do you have? You know, then we might be able
to solve, like do that market research. But I
would 100 % reach out and ask for some help,
talk to other people in business that have businesses.
They'll say, how have we've had the same issues
before? This is what we did. It might not be
the best thing for you to do. You know, find,
reach for some advice, get some ideas and you
know, you've probably done pretty well to get
to yourself to where you were in the first place.
So once you get a few new ideas and knowledge
of your business, you'll come up with something
differently. Check your circle, eh? Or talk to
us too, we'll be able to sort you out. Check
your circle of influence. If you're hanging around
with five people who are all struggling, you're
probably going to be the sixth person who's struggling
if you're hanging around with five people who
are... innovating and changing the world, you're
going to be in that position. And it's a hard
thing to do. And you have to be self -aware in
the first place. I know I bounce a lot of ideas
off a row. There's plenty of times where you've
looked at me and gone, what are you doing that
for, you moron? That's why you bounce the idea
for me. Exactly. But then we sit around and we...
We've come up with some ideas. Yeah, so the only
way you're going to come up with good ideas is
to actually brainstorm stuff. And some people
might seem a bit proud or whatnot, but if you're
moving house, generally people ask for and, but
if you're struggling in business, you don't ask
anyone because you're embarrassed for whatever
reason. But I say that's probably more important
to ask because it matters a lot more to your
family. It matters a lot more to your employees
to get right and even your customers. If you've
got a business doing something good, there's
a lot of people relying on you. So yeah, number
one, and probably the only thing, ask for help.
I've found, and I know you're not using your
podcast as a sales tool, but talking to Ro and
your entire team is talking to experts, and they're
not just going to bounce back what I want to
hear. It's, okay, here's your problem, here's
how to fix it. You're probably not going to like
it, but that's not what you're paying me for.
Yeah, people don't have the problems they have
because they know the solution. They know the
problem, they know what the solution would be,
but they haven't, they've still got the problem
because they don't want to do anything about
it. They don't want you to tell me what I'm going
to hear. Yeah. So, you know, understanding that
it probably is your fault and, but it's fundamentally,
you just got to do something. You can't just
sit there and say, it's a problem and I'm just
going to cut costs and it's going to go away.
Like you need to cut costs because something's
going wrong. So you need to do spot on. You get
run over, but you just got to do something. And
asking for help is usually a good point, even
if it's just someone to talk to, you probably
just go, oh, this is my problem, and you've gone
through the problem just by doing that, you'll
figure out five things to do. Some great topics
there. So today we've talked about how cutting
costs is not going to fix your problems, or it's
probably not going to fix your problems, but
it's more than likely that it may cause some
side effects of cutting costs can drastically
affect your business. So we've talked about how
Qantas is... drastically decreased their service
levels from just trying to cut some costs due
to some debts from COVID. Well, I don't know
the reason why they're cutting costs, but yeah,
we do know in the news reports, obvious from
our experiences, their service levels have definitely
dropped. Absolutely. And maybe most importantly,
if you're struggling, look at how you can grow
your top line income and how you may be able
to seek some help to do that. Yeah, and even
if that means spending more money, we didn't
mention that. I just thought of it as soon as
you said that sometimes you've got to spend more
money. That's not just that's not spend more
money to cover your costs and not change anything.
But does that mean you need to buy that bit of
equipment that that's just sounds way too expensive,
but it's going to change your business? Like
just go and buy it like if you were starting
a business, you probably you would have been
a necessity. So that probably comes down to the
difference between, you know, an investment and
an expense. Yeah, spot on. And some people say
a lot of things and a machine is an expense,
which is not true, because if you buy a machine,
you're investing it. An employee is at an expense.
Even an admin employee is an expense or is an
investment. And, you know, definitely advisors
and things like that who are just a big expense.
It's going to cost me 10 grand. And what am I
really getting? You're getting a different circumstance
to enjoy, you know, and that could be worth a
lot more than that. So sometimes you've got to
think, hey, you know, I've got no money and just
Rather than thinking that sorry rather think
you've got no money go there is money. I'm allocating
it to places where is going to give me the biggest
return and if that's a bit of short -term moving
things around to To get the result you want there
are definitely always some areas that you think
you can't afford that I'm going to be a much
bigger return for your investment than others
In my experience, I'm no financial advisor, but
it's always easier to make $10 ,000 than save
$10 ,000 If I want to go on a holiday, I just
find a way to make more money. If I can't afford
it now. It's always been that way and it wasn't
until later in life that I realized that. So
you're slaving away on a wage. You might be a
business owner who's drawing a wage and it's
a tiny wage compared to your employees sometimes.
And you're trying to save and save and save where
you flip the script, find a way, find a way to
make more money. Yeah, it's true. And even outside
of business, if you don't have a business, A
friend of mine asked me, maybe 18 months ago,
since no one even knows what I do. He's like,
oh, so you're a financial advisor? I said, no,
I'm not a financial advisor. I can't advise you
on those sort of things. You need a professional
advice for that with a 30 page report going with
it and a fact find. I said, what's your question?
No, I'll probably help you. And he goes, oh,
I just, I really need a bit of help budgeting.
Just, you know, really save. And I said, you
don't need to budget. He's like, why is that?
I said, well, you're going to cut a few things
out. You're going to stick to it for a few weeks.
You're going to be sick of living the life you
don't want to live. And then you're going to
spend it all. And then you're back to square
one. I said, you just need to make more money.
And he's like, what do you mean? I said, make
more money. I said, well, you can either save
and never do anything fun and sit at home and
do nothing because you have no money. Or you
can go use some of that spare time to make some
more money and then you can do more things. Instead
of watching. 20 episodes of whatever's on binge
at the time. Yeah. And then I think next time
I saw him - I think we're all guilty of that.
Two months later, he'd bought a few cows. Yep.
He's had a friend who had a farm and a paddock
that he doesn't use. It was happy for him to
put some cows in this. He bought some cows and
it doesn't sound like much, but that's a few
thousand dollars over the course of a year that
you're going to make, which you break that down
to weekly. It's not a bad little income. Then
he started doing some sessions, some private
sessions for what he does on the side, which
is just - Completely different, it wasn't taking
away from his job. Massaging cows. He was earning
pretty much half of his weekly income doing four
hours work. Yeah, yeah. So, you know, I think
a lot of the times, you know, you can cut costs
and you can get somewhere with that, but there's
only so many costs you can cut. Whereas if you're
growing your top line, finding new ways to make
money, there's unlimited potential. Great. Well,
that's all we have time for today. In our next
episode, we'll explore a topic called imposter
syndrome. If you have any questions about what
we talked about today, as usual, make sure you
visit our online website and book a catch -up.
You can reach us at www .businessabundance .online.
And we'll see you next time. Goodbye. See you
later.