Episode 379: Avoid These Mistakes: Essential Tips for Expanding Your Business
When business owners panic about escalating costs, they often make the detrimental mistake of cutting essential expenses. With his extensive experience in reaching eight-figure revenues across multiple businesses, Adam Stott shares invaluable insights alongside his marketing manager, Chris Cook.
In this episode, Adam and Chris dig deep into the critical topic of cost control for business owners. They address the common pitfalls entrepreneurs face when scaling and how to avoid the detrimental “death by a thousand cuts” strategy.
Adam emphasizes the importance of making informed decisions rather than arbitrary cuts. Their discussion sheds light on effective cost-control strategies, common mistakes businesses make, and the importance of balancing cost management with strategic investments.
Show Highlights:
- Cutting costs without strategic thought can harm your business. Focus on retaining investments in marketing, strategic advice, and sales teams.
- Introduce checks and balances to slow down cash outflows and ensure every expense is justified.
- Aim to reduce costs across the board by 10%, redirecting those savings to drive revenue.
- The right financial team can save you more money than their salary costs, providing better strategic oversight.
- Engage your employees to identify areas where costs can be reduced, utilizing multiple perspectives to find savings.
Links Mentioned:
Get your Business Growth Secrets SUCCESS PLANNER for FREE and profit like a pro: https://adamstottplanner.com/free-book47315172
Adam’s website: https://adamstott.com/?el=Pod
Watch the Episode on Adam’s YouTube Channel: https://www.youtube.com/adamstottcoach?el=Pod
Connect with Adam on Instagram: https://www.instagram.com/adamstottcoach/?el=Pod
Join Adam’s network on LinkedIn: https://www.linkedin.com/in/adam-stott-coach/?el=Pod
Coaches, consultants, and business owners – lower your marketing costs, increase ticket prices, and get more high-ticket clients: https://3daybrandbuilderworkshop.com/start-here?el=Pod
Transcript:
Please note this is a verbatim transcription from the original audio and therefore may include some minor grammatical errors.
[00:00:00] Adam Stott: How do you, as a business owner, control your costs? This is a big question. A lot of people make mistakes that impact their business so negatively when it comes to cost control and what we’re going to open up in this episode is how you can control your costs. In a productive way while still investing in the things that are going to help you to multiply money.
[00:00:30] Let’s jump in to this episode of business growth secrets.
[00:00:38] Hey, business owners, welcome back. This is a very important episode because we are going to be discussing cost control. And it’s so Difficult for many entrepreneurs to lean into some of the aspects that really help them in business. There are a lot of business owners that feel that they are afraid of numbers.
[00:01:05] And when their accountant or people start talking numbers around them, they start to get to a place where they get cloudy and their vision really starts to, you know, get cloudy out there and they don’t have much clarity and they get lost. In fact, many people go into a mini meltdown when it comes to actually understanding numbers.
[00:01:25] And what we’re going to talk about is some simple Moves that you can make that can help you as a business owner any stage. So you might be a startup. You might be right at the beginning and we can give you some practical numbers that you can keep your eye on and keep your finger on the pulse to get some better results.
[00:01:40] You might be growing and just feeling a little bit like that overwhelm is setting in. Perhaps you’re asking yourself the question very often. Where did all the money go? I’ve certainly been in that situation myself at times over the years,
[00:01:54] Chris Cook: myself at the weekend, actually.
[00:01:57] Adam Stott: Yeah, there’s a lot of people in different areas.
[00:01:59] Where did all the money go? Right? Because, you know, understanding numbers is super important in business. And we’re gonna be talking about it too. And also scaling when you’re scaling and you’re growing a really big enterprise. How do you keep your eye on the numbers? How to keep your own costs? You know, I’ve had many mentors and coaches that have taught me over the years, having built three businesses that have got to eight figures in revenue into the tens of millions of pounds.
[00:02:24] This is something I’ve got a lot of experience in, and we have a very special guest on Business Growth Secrets with us today with our marketing manager, Chris, backed by very popular demand. Ten new comments demanding Chris. They’re demanding you, Chris. So many. They’re coming in every hour. They can fast.
[00:02:42] He goes, you know, he’s getting out of control, right? He’s telling Steve that he’s not getting his seat back. And Andrea, they’re all fighting over this seat. I never knew fame would be like this. Good stuff. So, what we got, Chris, I know it’s all about. Cost control today. Yeah.
[00:02:58] Chris Cook: This is another question from the community. Obviously, we’d like to answer the questions from the community. This is from our school group. You kind of summed it up. The crux of it is she’s in the, well through the growth stage, she’s starting to scale. Lots of money going out the door. She needs some help.
[00:03:12] She needs some ways to control costs when going through that growth phase and into the scale stage.
[00:03:18] Adam Stott: So how can she do that? Yeah, let’s open this one up. What I will say is if you’re listening, you can go to our school group for free. That will be in the description. And you can post your questions there or you can post them in the comments and don’t be somebody that sits there trying to deal with everything yourself.
[00:03:37] You’ve got an opportunity here to go and get some advice, get some guidance and get your questions answered. So make sure you comment them or go to the school group and ask him this particular question. Cost control. Couple of first of all, some big mistakes that people make. When it comes to cost control and building their business out.
[00:03:52] Number one, Hey everyone. Hope you’re enjoying the podcast. We’ve got a free training that I’m doing right now online from the comfort of your own home called stand out brand. What this does is it shows business owners how to get noticed on social media, stand out. Get more leads and get more sales. So if you want to make more money in your business, head over to adamstop.
[00:04:16] com forward slash SOB. That’s adamstop. com forward slash SOB and join us on the free three day workshop. Stand out brand. Number one. They cut the wrong things. So they look at their costs. They get really panicked about all this money going out. And then because they don’t have the sufficient information, they’re cutting the wrong areas within their business.
[00:04:42] So a good example that is one of the one of the costs you shouldn’t be cutting often is your marketing cost because your marketing cost is what’s going to be bringing you in and New leads and new inquiries, and it’s going to be feeding your sales team when you’re scaling your business. And yeah, and literally, if you imagine your business as an engine, your marketing is the fuel that goes in the top that gets you running.
[00:05:11] All right. And we need that in order to get you driving that business forward. And many people make that big mistake. Instead, though, I’m going to give you some practical aspects of what you can do around marketing to understand it. Another. Cost that you shouldn’t cut and another cost that really should be cut is specialist information and advice.
[00:05:32] A lot of people, one of the first things they do is they don’t really need to get more specialist info and get more specialist advice or coaching or consulting or whatever it is. But it’s often. Exactly what you need, especially when you’re starting to feel like you’re losing control. And if you are starting to lose control, you feel like you’re starting to lose control.
[00:05:55] You need to go to your coaches, your consultants, your advisers, your senior leadership team, whoever it is that you strategize with and start having the right type of conversation. Now that’s super important. How much does it cost to do? Not having that conversation. Exactly. And the way you look at advice, because people can’t always constitute advice, but the best thing, the best way to look at advice, let’s say you have a consultant that you pay 50k a year.
[00:06:22] Let’s say for an example, seems like a lot of money out of your business, but you’re scaling your business up. And that advice is going to help you go to half a million pound extra in revenue. You’ve got a 10x return. But a lot of people only measure the short term of what that advice is worth over the year.
[00:06:39] What’s that advice worth over the next decade? Cause if it’s worth 500, 500 K a year, it could be worth 5 million over the next decade. And you cut the advice out and then you’re left on your own business can be a lonely place. You’re making mistakes. So don’t cut marketing. Don’t cut strategic advice is another super important element to to make sure you don’t cut and in the third one, not to cut.
[00:07:04] It’s don’t cut your sales teams. Now I don’t mean they say if your marketing isn’t working, you don’t just cut your marketing budget. You improve your marketing, but you still want to drive more leads into your business. If your sales people aren’t selling, it doesn’t mean you don’t cut that sales, but you might have to replace the sales person, but you replace it with somebody that can drive it.
[00:07:23] So you are always looking at marketing, sales, and advice as being good growth areas of the business. And then in terms of what costs, can you cut what you need to be looking at is one thing a growing business. So let’s say you’ve gone through a growth period, you’ve got a lot of suppliers and there are.
[00:07:42] financial levers that you can use. So there’s a few things you can do. Some very small things as a business grows. One thing you can do quickly, which you, if you’re at that stage is you can put a sign off process in place. So a sign off process is a, an easy process. Let’s say you’re a small business.
[00:07:57] You’ve gone from quarter of a million pound. You’re now doing 750, 000 in revenue. You’ve gone through that phase. You probably then haven’t got a sign off process. The person paying the bills has probably always been paying the bills and they just go and pay them and they don’t question them anymore.
[00:08:11] You put a sign off process in, now you’ve got what we call checks and balances. You’ve got somebody checking and balancing that payment and saying, actually, should we be paying that? Is that the right he’s like, okay, have we renegotiated this recently? Is there, you know, we looked at other suppliers and you’ve got now got a checking process, which actually slows the cash out down.
[00:08:34] You want to slow cash out down. You want to stop cash flowing out. fast. You want to keep it coming in fast, but you want to slow it going out down. Right. So in, in that terminology, that language is really important. So sign off process is a nice, easy one for a a business to start analyzing its costs in a better way.
[00:08:55] Another one which can really help in terms of Cost control is, it can make sure you can do something we call the 10% challenge, right? So you can take all of your costs that are going out the business, you can take your department head, your department leaders and everyone, and you can put ’em to a challenge.
[00:09:14] I wanna reduce all costs within the business by 10%. And you can run that throughout your business. You can run that as a quarterly incentive, a quarterly thing that we all do and then everybody’s committed to, can we reduce the cost of the business by 10%? Now, if you were to do that. That 10 percent goes straight to the bottom line.
[00:09:28] It goes straight to profit. So there’s another really good like little thing that you can do to lever up and get everyone thinking and considering cost control. And there’s all these different little moves that you can make to control costs out within the business. Another thing that you can do is look to your finance department, you know, start a lot of people and business owners don’t put too much time and effort into their finance department.
[00:09:55] They don’t actually invest in the finance department. And if you look at who you’ve got in your finance department and you start to see them as let’s say we see our financial controller, it is their job to save us more money and be more strategically intelligent around the money, the business, then the amount of salary we pay them.
[00:10:17] So if you’ve got to pay someone 50 grand a year to be a financial controller, 75 grand a year, or you’ve got a finance director, a hundred grand a year, whatever, or you’ve got a CFO is 120 grand a year. It doesn’t matter if you’re paying 120 if they go and make you 1. 2. So they save you 600 grand and they strategically show you how to increase cash flow by 600 grand.
[00:10:39] You’ve made 1. 2 from their 120. Make sense? So you always have to, and a lot of people don’t know this, but you’ve always got to be reviewing. The people and top grading the people so looking at hey is this person that we’ve got when we built our business from 100 to 250, 000 pounds is this person the right person to take us to a million pounds and then when you’re a million is and you go is this the right person to take us to three.
[00:11:04] And then you have three says it’s the right person to take us to 10 is the right person to take us to 30. And you know, you’re always building that team and growing that team throughout the business. In different ways. Yeah, I think there’s a lot of different.
[00:11:16] Chris Cook: Yeah, I think when it comes to marketing, from my point of view, my perspective, we are tracking everything.
[00:11:23] And we’re auditing everything. And if something isn’t getting us the right ROI or OS, We’re stopping it or we’re changing something. So if it is, we’re scaling it.
[00:11:32] Adam Stott: Well, this is a really important point you’ve just made. It brings us to another one is reporting. People become accountable when they have to report.
[00:11:43] So by asking your team to report into you save a lot of time. And you get their eyes doing the checks and balances in every different department within the business as well. So reporting becomes an incredible, incredibly important function. And then crowdsource ideas. So this would be your fifth one. I see you’ve got five ways.
[00:12:06] I think we’re on a fifth one now is It’s crowdsourced ideas. If you can bring 30 people in your team together and say, Hey, where are we spending money that we don’t have to, where could we save some money so we can reinvest in training or the team, you know, make sure there’s something in it for them.
[00:12:21] And what ideas have you got that you could come up with and believe you or not, you’re going to have everyone in your, Department, everyone in your teams looking at different ways to save costs and control costs within the business. And then you’re using 30 brains rather than just one. And that can help you to spot different ideas.
[00:12:40] Chris Cook: Can I just ask, so in obviously marketing, we’re continuously investing in marketing. Any other areas you commonly see business owners possibly over investing in? Some areas where they’re commonly overspending and perhaps they don’t need to.
[00:12:56] Adam Stott: There’s loads of different things. I don’t, one thing that businesses don’t want to fall into the trap off is there’s a person for that problem and I see this all the time.
[00:13:06] So, okay, we’ve got this problem, hire someone else to deal with that. I’ve got another problem, hire someone else to deal with that, got another problem, hire someone else to do with that. Actually, one of my coaches always says before you hire somebody else. To do the job, go and do the job for a day yourself and actually see what the inefficiencies in the productivity in that particular job before you actually then go and bring somebody else in to do it, because you’re very quickly realizes that person swamped.
[00:13:34] Are they under, are they stressed, you know, or actually are they just stressed. Yeah. Because actually, rather than you spending 20 grand, 30 grand, 40 grand, 50 grand, whatever it is on a new person, whatever you have to hire into, you might need to spend five grand on training, which then would be, you know, a lot cheaper and a lot better way to control your actual training.
[00:13:57] costs than just keep adding people. I think businesses do this all the time. Just add people.
[00:14:02] Chris Cook: Recruitment can be expensive.
[00:14:04] Adam Stott: Recruitment can be very expensive. Recruitment costs are expensive. For sure. You know, training can be expensive. So. Training your people is a great way to control costs as well, because if you make your whole organization more productive and more efficient, then that in turn means you need less people and you can be more productive as in the overall business.
[00:14:25] Okay, great. There’s loads and loads of different ones. And when you go through your different departments, you will find areas in every department that you can become leaner. meaner, faster, and that’s what you got to look at. How do I become? How do I become faster, leaner and meaner within the business to create better results for sure.
[00:14:46] Chris Cook: And when you’re spending five grand a month on stationery or something like that, you know, there’s an issue. So there’s little things like that you gotta do.
[00:14:54] Adam Stott: I think there’s a counterbalance to this as well. Which is really important actually to add, you know, Richard, who was the first, who, you know, yeah.
[00:15:03] First finance director that I work with directly. He always used to say, Adam, you don’t want to die a death of a thousand cuts. So it’s a very painful death. He said, and this is what a lot of business owners do. They just cut.
[00:15:20] And they’re stripping away everything. And as they keep stripping away everything, the business really doesn’t have much meat left on the bone. And you end up in a situation where the business is dying because you’re bleeding constantly. So, so business owners do have to realize The investing in the right areas is as important as cost control.
[00:15:42] So it’s both sides. So you have to ask yourself, how do I control my expenditure in a calm, measured way, and any savings I make, how can I redeploy that money Into increasing the revenue and the sales of the business. So all savings need to go back into increasing revenue. And if you can do it that way, then that’s how you can become lean because you save money here, deploy it here and monitoring measuring what’s monitored and measured.
[00:16:14] Becomes improved and what is ignored becomes neglected. I think we’ll leave it on that one, but there’s some good, really good question. Look, and you know, we love talking about these advanced business topics and this has helped you. Tell us in the chat, you know, tell us about, you know, cost control.
[00:16:35] Tell us about your experiences. We’d love to hear from you. One of the things is we’re talking here, you know, we’re doing this just to help business owners out there. Give them some practical information that they can use within their businesses. So we’d love to hear from you. In the comments or share this episode with somebody that can benefit from it because that’s why we do it, right?
[00:16:55] So super powerful. We look forward to to meeting you in person very soon, and I hope you’ve enjoyed today’s episode of Business Growth Series.