The most valuable assets in any company probably aren't what you think they are. They're not your inventory or your capital equipment. They're your employees you know the people out on the front lines making a profit for you. Sometimes I think that fact slips by the well-meaning penny-pinchers. Their only plan is to save money with no concrete assessment of where the waste is or where it makes sense to cut back on expenses. Having no plan also means that when times get tough, cutting people is the first way those "frugal" types think of to cut costs.
Did you ever have a boss who was just cheap by pinching pennies on the silliest things or who tried to cut corners to the detriment of your product or service? It happened to me. I worked at a company where we had to reuse throwaway items. My boss even had one co-worker go "dumpster-diving" to retrieve discarded containers to reuse them for our work. Not only did this activity violate federal regulations, it also violated the adage "penny wise and pound foolish." The most disingenuous part of that scenario was that he purchased and drove the company-owned station wagon: A Mercedes station wagon*. How frugal is that?
When you think of company assets, you generally think of computers, printers, copiers, compressors, lathes, vehicles and other tangible items that you can see. Rarely does anyone add people into that list. We need to change our thinking on the topic of people assets. Computers, vehicles and lathes all depreciate with time and are easily replaced with newer and often less-expensive models that do more or have more features.
Alternatively, your people assets become more valuable over time with training, experience and knowledge. You can't replace those with a newer model; nor can you replace the loyalty or longevity of an experienced employee.
Drafting a plan is easy and almost painless. Ask your bookkeeper or accountant for a list of expenses, excluding employee salaries for the previous fiscal year. This exercise tells you where you're spending your money. Those catered lunches and dinners out will show up like a beacon in the night on this list. Donations to the Ladies Quilting Auxiliary and to the Sons of Retired Bathwater Changers will appear to be glaring at you as well. There are some worthwhile charities out there and continue donating to them but let the quilters have a bake sale to raise money.
While looking at your expenses, you might want to find out why you're spending $1,000 a month on "office supplies" if your primary business is managing servers. Investigating expenses often leads to wasted money that's recoverable. If those office supplies are part of your business, have you considered charging your customers for them in some way to offset your costs?
If after looking at your expenses and trimming away the excess fat, you find that cutting an employee or two (or more) is still your only option to maintain the business, consider this alternative: Renegotiate salaries with your employees. An announcement of "A 10 percent across the board salary reduction is necessary to keep 100 percent employment in the company" is a good sales technique for such news.
The message here is to be careful and smart when cutting costs. Cut the ones that make sense to cut, but do so after making an educated assessment. You wouldn't throw away your hard assets (computers, copiers, lathes), and you shouldn't throw away your people assets either. Be innovative. Explore alternatives before taking the easy way out. Do you have what it takes to be frugal?
*It wasn't a blatantly frivolous purchase, it used Diesel fuel, which at the time, was less expensive than gasoline.
Ken Hess is a freelance writer who writes on a variety of open source topics including Linux, databases, and virtualization. You may reach him through his web site at http://www.kenhess.com.