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Getting The Right Balance Between Fixed And Variable Costs


14/10/2010

By Sancho Simmonds, Assurance & Business Services Director at Smith & Williamson

In today’s global and technology-enabled economy things happen more quickly than ever, so a business model which allows you to be nimble and flexible is a major benefit in helping you to survive and prosper.

Here are some areas to consider to create flexibility in your cost base.

Don’t plan your cost base around unfounded expectations

Some businesses build an infrastructure based on what they hope will happen at some point in the future. Such expectations are often based on events which may not happen as intended or even at all. For example,...

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...if revenue has been flat for some time, don’t take on more resources to support increased revenue unless you can see actual evidence of growth coming through in your results.

Flexible working arrangements

Many people look for organisations with flexible working environments. Enabling people to work from home may give you access to a lower cost workforce, reducing the employee’s personal cost of commuting and potentially increasing staff motivation, satisfaction and productivity. Some firms offer sabbaticals to staff during quieter times. This can often have a double benefit — a cost saving as well as increased staff satisfaction.

Part-time resources

Consider building up your staff resource slowly, using part-timers or outsourcing to support your growth. There are a number of organisations offering highly skilled, experienced individuals, for example finance directors and marketing directors, to work with businesses on a part-time basis. You can request more time from these individuals as and when circumstances dictate.

Lease terms, lease breaks and long-term fixed priced contracts

Before signing up for a long lease, carefully consider whether it is appropriate for your business. What happens if demand for your product or service falls away or your needs change? Sub-letting part of a property, for example, is not necessarily simple... continued on page two >

 

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