In early 2019, my company had a big problem. A large client suddenly went out of business, leaving us with a multi-million dollar line of credit to repay. For a company of our size, this was a significant issue that could have spelled disaster.
Instead, it was an eye-opening experience that set us up for a competitive advantage and profitability just one year later. We solved the problem by analyzing the way we approach every aspect of our business. We made three key moves to dig out of the hole we found ourselves in: we reworked our real estate portfolio, focused on our core competencies and renegotiated vendor relationships.
Here’s what we learned, and what you can do if you ever find yourself in a similar predicament.
A Hard Look At Real Estate
Although like most companies, our largest line item is payroll, we opted not to cut staff or furlough our loyal employees. Instead, we started with real estate.
If your company has multiple branches, I suggest exploring where you can consolidate locations without burdening clients and associates. You might find that making some changes in your operating model (in our case, that meant access to paycards, online registration and a client portal) can reduce the need for people to come to your branches.
I also suggest taking a hard look at each of your leases to see where you can renegotiate or get out of a bad deal. Consolidating to create high-performing “super branches” can save you significant amounts of money and make your operation more efficient.
But you can’t grow through cuts alone — you still have to build. We found success by leasing shared office space instead of entering into new bricks-and-mortar leases. I also suggest implementing remote work arrangements to reduce your overall space requirements. We found that this had the added benefit of improving overall employee morale and retention.
If you’re still spending too much on physical space, consider relocating your corporate headquarters. If you’re in an expensive location like New York City, consider moving to another state where real estate is cheaper and employees may be easier to recruit and retain. With people leaving major metropolitan cities in droves, you may find greater access to talent, more collaboration with other companies, new client opportunities and more overall ease of doing business.
Focus On Core Competencies
Pinpoint what you do really, really well, and make sure you’re monetizing it. I suggest working with a consultant to help you get the most out of your company’s specific expertise. You could even consider implementing a revenue-sharing model to incentivize your staff.
At the same time, you should also look at what functions you’re handling internally and what are outside your core competencies. What can you outsource? Offloading certain tasks can help you stay focused on what you do best and work with partners who are experts in their fields. Philosophically, this is the foundation of a staffing model — which is our business — but it took a crisis for us to see the value of applying outsourcing to our own company.
Consider bringing in your service vendors and asking them what they can do for you to improve your business and reduce your cost. Ask what new services they can offer and if your current arrangement is the best they can do. You may be able to negotiate better overall agreements. This strategy worked so well that vendor reviews are now part of our annual plan.
This experience taught me a valuable lesson in 2019. You should always look for ways to improve and streamline costs — even when things are going well. It’s ok to make moves because you have to, but it’s important to always run your business with the goal of becoming more efficient, in good times and in bad.