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Tag: Cost Cutting

  • Invest in Growth or Cut Costs? 3 Things Top Companies Do Well Despite Economic Uncertainty | Entrepreneur

    Invest in Growth or Cut Costs? 3 Things Top Companies Do Well Despite Economic Uncertainty | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Will there be a recession? Are we in a downturn? Even economists can’t agree. Still, entrepreneurs are busy planning, projecting, and looking into the future. There are countless decisions to be made, but one of the most critical is what strategy your company will pursue this year — is it a year of growth or status quo?

    Since founding my PR agency in 2008, I’ve had a front-row seat to high-growth companies — or those with the ambition to be high-performing. CEOs of hyper-growth companies look at the world differently; external conditions are a consideration, not a driving force, because thriving companies know the cream always rises to the top and build their strategies around getting there.

    When uncertainty is clouding decision-making, there is a lot of pressure to turn to cost-cutting.

    The reality is: It doesn’t matter if a recession is looming — a company in your category will be No. 1 in revenue this year regardless. If it’s your company, it will be because you controlled the things you could. Since 2008, I’ve seen thriving companies do these things with total clarity, regardless of economic conditions.

    Related: 10 Growth Strategies Every Business Owner Should Know

    Reinvestment that aligns with growth

    Ambitious companies know cost-cutting has never led to growth — ever. It may increase profitability, but that’s a different strategy. Growth strategies require investment.

    Commonly, bean counters say things like “our salespeople make too much” or “there’s no direct line to sales with this initiative,” that’s their job — to point out these potential concerns.

    But high-growth CEOs know companies in high-growth mode operate knowing that every dollar they invest has a return because they invest in the right places for growth. When that ROI starts to flatten, you’re in maintenance mode, not growth mode.

    Thriving companies align investment with growth. They spend money on marketing, sales and PR because those are the levers you pull when you’re growing or want to grow. The average company with $10 million to $25 million in revenues spent 15% of its revenue on marketing initiatives. If you want to be average, there’s your baseline. If you want to be dominant, you must stretch that budget, and it may mean giving up some profitability in the short term.

    Growth-oriented CEOs know spending on growth is essential for the next phase, whether IPO, acquisition or capital infusions. Everyone loves a winner — the goal is to be the winner in the eyes of your stakeholders who carry you to your ultimate goal.

    Related: Why You Need to Reinvest Half of What You Earn Back Into Your Company

    Support their sales process vigorously

    It doesn’t matter if you sell to businesses or consumers. Not all sales activities have a direct line to a sale.

    What does lead to sales is consistent exposure and relationship building. Relationships are a differentiator in today’s very crowded, very competitive marketplaces. According to the U.S. Census Bureau, in the first half of 2023, 3.12 million businesses were started, meaning new business starts in 2023 are trending against historical averages. Starting a business has never been easier; every business has competitors chomping at their heels. Now, only 6% of businesses ever reach revenues over $1 million, so those companies aren’t your competition — yet. But one of those companies that started three years ago is probably creeping up on you, and you don’t even know it yet.

    Salespeople or sales channels need visibility, and they need a reason to engage and start a conversation with potential buyers. If every discussion begins with “we have a deal for you,” then you are conditioning your buyers to wait for a sale to buy. That’s not a winning tactic unless you can win the race to the bottom.

    Enterprise and publicly traded companies often use this strategy — and it’s sometimes a reason companies want to IPO, so they have the budget to win this battle and be the dominant player; once they own the marketplace, they’ll be able to raise rates with impunity — at least for a while. Most privately owned businesses cannot win this war, so they must be growth-minded and remember to support the sales process.

    Your marketplace positioning dictates how you support your sales team and sales initiatives. If you want to be No. 1, you need to be the most trusted and visible, so allocate your marketing budget with that split in mind. If you’re already the most trusted of your competitors, you may only spend 40% of your budget on trust-based initiatives like PR, face-to-face initiatives or events. If you’re already getting visibility but aren’t closing the deal, investing in trust is essential. One reason people invest in PR is because it provides both exposure and trust. Trust isn’t a line item on a spreadsheet, but you can plainly see it in key performance indicators (KPIs).

    Related: This Strategic Growth Lever is Right Under Your Nose. Harness It To Multiply Your Company’s Success.

    Track success metrics unique to the initiatives

    Everyone tracks revenue and profitability. But companies in growth mode track KPIs that give them insight into trust and reach. Thriving companies value their reach and reputation together.

    Trust KPIs should be a steady build with noticeable year-over differences. If you were building a house, trust is your foundation.

    Trust KPIs could be:

    • Time to convert
    • Direct website visits
    • Brand mentions
    • Brand associations (how trusted are the other brands you associate with)
    • Revenue per new customer
    • Return on ad spend (ROAS)

    Awareness KPIs are important because exposure matters. Back to the house analogy, awareness KPIs would be your framing.

    Awareness KPIs could be:

    • Impressions
    • Incoming leads
    • Reach (ads, media mentions, social media)

    Growth CEOs track these metrics over time. Monitoring over time is essential because growth is like a train. It moves slowly at first, but once it starts to build steam, the speed of growth happens faster, assuming you keep fueling growth.

    It’s a radical idea to ignore external factors — but that’s exactly what CEOs of ambitious companies do to grow. Growth mode isn’t a way of life; aggressive growth is the pathway to the next step, and during that time, there will be some eggs cracked to make an omelet. But I’ve noticed CEOs investing in, measuring and staying the course with growth do so with laser focus and focus on controlling the factors they can control.

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    Tara Coomans

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  • Walgreens Unveils New CEO, $1 Billion Cost-Cutting Plan | Entrepreneur

    Walgreens Unveils New CEO, $1 Billion Cost-Cutting Plan | Entrepreneur

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    Last week, Walgreens Boots Alliance, Inc. reported operating losses of $6.9 billion in its earnings report for the 2023 fiscal year ending on August 31, $6.8 billion of which the retailer says was related to opioid lawsuit claims and litigation.

    Amid the losses, Walgreens is now unveiling an aggressive cost-cutting plan, including closing 60 of its clinics, Axios reported.

    The company also stated that it faced challenges such as a weaker respiratory virus season, reduced COVID-19 vaccine demand, and a challenging economic environment for consumers, as acknowledged by its executives in an earnings call.

    As part of the cost-cutting measures, Walgreens will close 60 VillageMD clinics and unprofitable stores (the number of stories is not provided), and make adjustments to in-store operating hours based on local market trends.

    On the corporate level, the company added it is suspending nonessential projects and requiring all remote workers to return to the Deerfield, IL office by the end of November.

    Related: Walgreens’ Battle Over High-Tech Cooler Doors Heats Up

    The company has also been grappling with fierce competition from CVS Health, Walmart, and Amazon, all of which are focusing on expanding its primary care services.

    “Walgreens has lost customer share in areas like beauty and personal care. Some of this is because prices remain too high and are uncompetitive – something more and more shoppers won’t tolerate in the current environment,” GlobalData Managing Director Neil Saunders told Reuters.

    In the wake of the cost-cutting news, Walgreens shares surged by 7%, Axios added.

    Walgreens Names New CEO

    Walgreens also appointed healthcare industry veteran Tim Wentworth as CEO last week.

    Wentworth was the CEO of pharmacy benefit management company, Express Scripts, and an executive at Cigna. He’ll lead efforts to diversify Walgreens’ healthcare services, Reuters reported.

    The decision comes almost two months after former CEO Roz Brewer resigned after a little over two and a half years on the job. Ginger Graham, lead independent director at Walgreens, had been working as the interim CEO.

    Wentworth retired in 2021 but ultimately decided to re-enter the workforce to take on the role of Walgreens’ first-in-command.

    “What made me decide to come back was a chance to lead this iconic brand and company at a time when it’s not in a steady state,” Wentworth told CNBC.

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    Madeline Garfinkle

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  • How to Fall Back in Love with Your Business | Entrepreneur

    How to Fall Back in Love with Your Business | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Early in my entrepreneurial journey, I found myself stretched very thin and losing my enthusiasm. I was trying to figure out, “Who will I be when I grow up?” I was a coach, coaching a variety of clients with a variety of needs. A couple of clients were executives struggling with work-life balance. A few clients were small business owners needing help with team member issues. Some were coaches trying to grow their own coaching business. They saw how busy I was with client work and figured I knew something about marketing. Money was coming in. I had plenty of work, and I was exhausted.

    To survive the critical first five years of business, we entrepreneurs typically try all kinds of things to see what works, to create a demand for our products or services to find clients. Once we find clients, we try to serve different needs. We say “yes” to every opportunity that comes our way because we are determined to make a go of the business.

    We pile on the products and offerings, always looking for ways to get the cash flowing. While this helps your business survive the first few critical years, it is not a long-term strategy for thriving. If we continue to operate this way, our businesses will become overweight, and the demands will be crushing.

    We end up with products and offerings that may or may not be profitable. But we’re so busy with all the demand we created. Who has time to stop and pay attention to which customers, clients, products and offerings are the most profitable? AY!

    Related: 4 Companies Followed This Secret Formula. Now They’re Valued at $50 Million or More.

    Our capacity gets stretched thin, and we decide it’s time to hire. Now we are increasing one of the biggest expenses in our businesses: payroll. We are growing our payroll to serve customers who are not profitable.

    Even though revenue is growing, our business is becoming less and less efficient. This inefficiency is why an entrepreneur bringing in millions in revenue can still struggle to meet payroll, laying awake night after night worrying about cash flow.

    If you’re recognizing yourself and your business in this description, it’s time for your business to go on a diet! Shed the extra, unnecessary weight in your business.

    The 80/20 Principle provides a path forward. If your business generates $1,000,000 in revenue annually, 20% of your clients likely are responsible for $800,000 of that $1,000,000. Suppose you set a modest goal to increase revenue by 25% from the top 20% of your clients by delivering additional value. In that case, your business will generate $200,000 in additional revenue annually, for $1,000,000, from your top 20% of clients.

    Related: What You Really Need to Know About Marketing’s 80/20 Principle to Succeed

    The implications of this are significant if it’s important to you to have more time for what matters most and more money in your bank account. It allows you the choice to drop 80% of your clients. Do you know those PITA (Pain in the Assets) clients? The ones who complain, are never satisfied, pay late and take too much of your team’s time and energy? Imagine being at choice to let them go without any negative impact on your revenue!

    Would you be okay with that? I’m betting you would be. Letting them go increases your profit. You get to work less, serving fewer clients. Moreover, the clients you are serving are a joy to work with. They appreciate you and the value you deliver. The freed-up time also allows you to replace those you drop with better clients who are similar to the clients in your top 20%.

    Because you are serving fewer clients, you only need a few team members. Remember, payroll is typically the biggest expense in a business. Furthermore, suppose you put A-Players in the remaining roles and align the A-Players with roles that allow them the opportunity to work from their strengths. In that case, you will see 900–1200% more productivity from those A-Players than from “warm body” employees.

    Meanwhile, you have far fewer headaches and more time for what matters most, and you are running a much more profitable business.

    This was painful for me at first. I created a robust, evergreen program to help coaches with their marketing. We had almost 50 coaches in the program. My virtual assistant ran the program, and her hours increased almost weekly. These coaches were not tech-savvy and needed a lot of hand-holding to utilize the online platform. I loved that I had created a “hands-off” offering that brought in passive revenue. I quickly realized that this offering was not hands-off and was losing profitability weekly as we added participants. I cut this program. The business was more profitable within two months, even though revenue dropped! It’s not about how much you make, it’s about how much you keep.

    My next step was to claim my top clients. These are the twenty percent of clients contributing eighty percent of the revenue to the business, the ones I love working with the most, whose values align with mine, and who value my services. Gremlins screamed in my head: “But what if you lose business?” “What will your executive clients think when you focus on small business owners?” “Don’t let anyone down!”

    Saying goodbye to clients who were not my top clients was hard. The following week, I had open spaces in my calendar. This was fun! I had room to be creative again. I got to work on improving services for my small business owners. I showed up on-site. I asked questions. I saw simple ways I could help. They ate it up! They paid me to do more for them. They smiled when they saw me on-site, working with their teams. Their team members looked forward to our meetings. Suddenly, my days were energizing. I looked at my calendar each day and thought, “Wow! How cool is that to get to work with these people today?” Work became fun and life-giving. I had fallen back in love with my business.

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    Dr. Sabrina Starling

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  • The Dos and Don’ts of Recession Cost-Cutting | Entrepreneur

    The Dos and Don’ts of Recession Cost-Cutting | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The “will it… won’t it?” recession has been on just about every business owner’s mind for the better part of the past year. And if you’ve been keeping up with downturn-related news, you’ve likely seen countless articles on how companies and their operations and logistics professionals are preparing. Many of these focus on cutting costs, and perhaps for good reason. During a recession, consumers tend to have less spending money, of course, and when sales decrease, profits do, too. To counter this, the classic move is to scale back expenses, but there are critical factors to consider first.

    Don that green visor

    Break out that general ledger, drill down into your expenses, and see exactly where the money is going. According to a study by Motley Fool’s The Ascent, if you’re like four-fifths of Americans, you waste more money than you should.

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    Mike Kappel

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  • 3 Ways Companies Can Reduce Their Cloud Costs | Entrepreneur

    3 Ways Companies Can Reduce Their Cloud Costs | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Many people’s experience with cloud costs is limited to the monthly $10 or so bill they get from Apple or Google. But for technology companies, which have to manage and process vast amounts of user data, it can be the second-biggest expense after payroll. Indeed, when Snap went public in 2017, filings revealed the company had more than $3 billion in cloud services contracts with Amazon Web Services and Google.

    And if you thought your cell phone bill was hard to understand, try making sense of cloud charges. Companies like AWS, Azure and Google offer thousands of options, with variations that can result in some eye-popping overruns, whether it’s a startup accidentally racking up a $72,000 bill during a few hours of testing or Pinterest having to spend an extra $20 million to accommodate a bump in user demand.

    In fact, it’s estimated that at least 30% — or $180 billion of the nearly $600 billion on cloud spend globally — is entirely unnecessary. The culprits can be as mundane as multiple copies of identical files or failing to clean up outdated or unused assets. Often, cloud costs are a black box altogether. In our 2020 Saas Cloud Spend survey, about one-third of the decision-makers who responded didn’t even know their company’s cloud spend as a percentage of annual recurring revenue.

    Making sense of shifting cloud use across teams and contracts can seem like a game of whack-a-mole. But by focusing on three principles — visibility, accountability and automation — companies are finding ways to fight cloud spend, often saving millions and avoiding layoffs in the process.

    Related: With Rising Costs and Vendor Lock-Ins, Is a Cloud Exodus in the Making?

    Visibility: You can’t fix what you can’t see

    The first step is to understand where cloud spend is happening. This isn’t quite as easy as it might sound. The very characteristics that make the cloud so convenient also make it difficult to track and control how much teams and individuals spend on cloud resources. Even the costs can be variable, depending on the type of service used, the resources consumed and the time of day or week.

    According to the FinOps Foundation, a group focused on advancing best practices in cloud financial management, most companies still struggle to keep budgets aligned. The good news is that a new generation of dedicated tools can provide transparency. Resource tagging can automatically track which teams use cloud resources, making it possible to measure costs and identify excess capacity accurately. Meanwhile, with cloud cost anomaly detection, users can receive alerts when the meter starts ticking wildly. But visibility is only the first step to bringing costs under control.

    Accountability: Put someone at the helm

    Companies wouldn’t dare deploy a payroll budget without an administrator — or an entire HR department — to optimize spend carefully. Yet, when it comes to cloud costs, there’s often no one at the helm.

    That’s why the second step is establishing accountability and ownership for cloud costs. Enter the emerging disciplines of FinOps or cloud operations. Increasingly, organizations are standing up these dedicated teams, whose purview can embrace everything from setting cloud budgets and negotiating favorable contracts to putting engineering discipline in place to control costs. Importantly, this isn’t an annual exercise but an ongoing commitment.

    To work, these teams must be given authority to create guardrails enforced across the company. One of the reasons cloud spend spirals out of control so quickly is that teams have been insulated from the cost effects of their cloud use.

    Say a developer is testing a new program or feature and has created a machine in the cloud for this purpose. It might seem easier just to keep the machine running than to power it down and restart it. But budgets suffer when developers take up that bandwidth during periods of latency. Multiplied by hundreds or thousands of users across the company, the wasteful spending quickly adds up.

    Related: Cloud Data Warehouses Are a Game-Changer for Modern Businesses. Here’s How to Utilize Them for Growth and Expansion.

    Automation: The missing ingredient — AI

    But even with a dedicated team monitoring cloud use and need, automation is the only way to keep up with complex and quickly evolving scenarios.

    The sad truth is that much of today’s cloud cost management remains bespoke and manual, even at some of the most tech-forward companies. In many cases, a monthly report or round-up of cloud waste is among the only maintenance done — and highly paid engineers are expected to manually remove abandoned projects and initiatives to free up space. It’s the equivalent of asking someone to delete extra photos from their iPhone each month to free up extra storage.

    That’s why AI and automation are critical to identify cloud waste and eliminate it.

    Amazingly, the most recent FinOps Foundation survey reveals that fewer than 40% of organizations have automated reporting for cloud usage or anomalies, notifications for cost overruns, rightsizing containers or other statistics. But this is just the first step of automation. The next step is to intelligently and automatically remove the waste. I’ve seen Fortune 1000 companies reduce cloud spend by up to 40-50% by automating best practices.

    For instance, tools like “intelligent auto-stopping” allow users to stop their cloud instances when not in use, much like motion sensors can turn off a light switch at the end of the workday.

    Companies that rely on “spot instances” to access surplus capacity can run automation that helps them access the best rate, much like Expedia lets travelers access better deals on hotels and rental cars.

    Meanwhile, even more tools are being developed to help companies model the most cost-effective service contracts or sell excess capacity on the secondary market

    As cloud management evolves, companies are discovering ways to save millions, if not hundreds of millions. With next-level AI now handling the heavy lifting of identifying and eliminating cloud waste, the very backbone of the tech economy — data storage and processing — is getting a much-needed overhaul.

    Related: The Challenges of Optimizing Your Cloud Spend in 2022

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    Jyoti Bansal

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