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Welcome to our blog.
Work Hard. Spend harder. The culture of the startup, fast growth environment is adrenaline fueled. The need for speed affects all areas of the business, including company spend. Funded start-ups are under insane pressure to demonstrate continuous return on investment, and quickly. This type of pressure in an already 24/7 “make it happen” now environment means that often, spend control goes out the window. No one has time to scrutinise the figures, and everything should have been delivered yesterday. Challenging a start up founder about a business case (if there is such a thing) is not for the faint of heart.
The reality behind fast-growth often translates into buying sprees, an increase in costly expert labour and all sorts of expenses. The pressure is on to deliver new initiatives whilst they are still in development. The push to be agile and responsive means that business changes are made whilst in full flight.Huge investments made in one initiative may need to be pulled or maneuvered to another area. That’s the nature of the beast.
At some point however, someone will review the figures. And freak out. This seems to be what has happened at WeWork. CEO Adam Neumann has called on staff to “manage the nickel“. Gone are the breakfast of salmon, eggs, bagels and yogurt provided to staff at meetings.
This is the classic knee jerk reaction. Cut back on expenses. Rediscover the joys of living frugally. And recycling the staff room coffee grinds. Really, what is a start-up speed junkie to do? A few practical tips:
If the above fails, you can always get your staff to wear a “Pavlok” shock wristwatch. When they overspend their assigned expenses, they are gently electrocuted into line. Funnily enough, the backers to this invention, are WeWork… I wonder why that wasn’t introduced straight-up as part of the Manage the Nickel Strategy?
We have an inkling that Brexit will impact Australian trade opportunities with the UK, and possibly Europe. But what would this look like in practice for companies exporting goods and services into the UK or participating in UK tenders? It may have appeared that Brexit is pie in the sky, and thus not worthy of too much consideration. But UK polls clearly reflect a public sentiment in line with the “Leavers”, and we’ve seen plenty of public hand-wringing by bureaucrats about the dangers of Brexit, and rightly so.
The existing EU-Australia Partnership Framework sets out co-operation on multi-lateral trade, and reduces barriers to trade by introducing a more level playing field including standardising technical assessment procedures. For instance the CE electrical standards. Australia exports to Europe totaled $AUD 22.7BN with $AUD8.6BN to the UK alone during 2014-15. (Austrade). There is presently no Free Trade Agreement with Europe in place as yet. Post Brexit, any trade benefits enabled through the EU Framework will likely cease to apply to arrangements with the UK.
Under the Lisbon Treaty 2009, the UK will only have two years to negotiate the terms of its exit from the EU. Will anyone have time to assess the repercussions on existing trading partners, such as Australia? What would the existence of such a transition mean for companies engaged in exporting goods & services to the UK? Could it be argued that agreements concluded during this period under UK/EU terms can be challenged at some future date for instance? It is likely that the UK be able to impose its own specifications and standards on companies post the two year period.
One hopes that in the preceding months someone in federal government has had the wherewithal to start mapping out what an interim trade arrangement with the UK (and the EU for that matter) might look like, and lobby for Australian firms. The next 24 hours will be telling, and it will be a long night. Better put the kettle on..
Streamlining causes sleepless nights, and not only for the staff losing their jobs. If you are having to come up with ways of saving cash now, then take a pause and consider this. Where is your company leaking money? We know that head count reduction is a tried and tested method to keep a company from going under. There are costs associated with this strategy. When your company headcount or “realignment” strategy is done, and the dust has settled, what are you left with? A motivated, energized workforce, keen to deliver quality and rock-star performance? Or is the reality a two+ year tough uphill struggle of overcoming all sorts of unspoken fears, whilst internal dynamics are being worked out?
What is the cost of your head-count?
In the rush to execute (no pun intended) a headcount strategy, crucial aspects such as knowledge transfer, the cost of roles left unfilled, and even the impact on wider market confidence are completely overlooked. And yet many companies are so very keen to be seen to be “taking tough action” and start wielding the axe. Sometimes, change needs to happen internally. Sometimes we need to look at re-wiring our modus-operandi. Tough questions need to be asked and answered. How did we end up here? Why did we end up in a position where we are bloated with staff, and yet not achieving our objectives? Why are we spending, and losing so much money?
No Time Like the Present to Make a Difference
If the clock is ticking, now is the time to act, and take a hard look at where your company is leaking money. Chances are, identifying and controlling maverick spending within your organization can go a long way to redress the balance sheets in your organisation. Hard savings and efficiency benefits can be achieved of between 7-20% on the overall cost of contract spend alone. Say your annual spend is $200M, possible savings achieved through moving off-contract spend into compliance contract management could be anywhere from $2.4M per year upwards. Based on ABS average annual salary rates, that would pay for 30FTE’s. That’s pretty significant. And this is just looking at one small 5% savings opportunity across your company contract spend. On an annual spend of $200M, you can realistically achieve at least 12% hard savings by implementing efficiency strategies across the way you manage buying and supply chain activities. Enough to have an impact. Enough to stop and rethink your headcount strategy.
So before you wield that axe, take a breather. Assess the real cost of a head-count exercise. Take a moment or two to review where your company is leaking money, and how your expenditure is managed across your organisation. Because rather than showing your talent pool the door, perhaps the benefits, and opportunity lies in how you optimize the resources you have and controlling the way you spend.