When you work for big companies it is very easy to get too familiar with big numbers. I remember a few years ago when I was the COO of a relatively small company and my friend a vice president of a giant multi-national. I was trying to raise three million Euros and he had just invested nine million on setting up a new trading channel. However last week, the tables were turned and I was shocked by what I heard.
I was talking with one of my larger clients about a scheme that could bring about a 40% reduction in year on year costs, simply by switching to a new supplier. My counterpart explained that he might not want to pursue it because it would most likely cause a certain degree of upset, not only with a colleague in another department, but also with the relationship with his current supplier (with whom he had multiple existing contracts). But later, when I re-did the sums on the back of an envelope, I calculated that the 40% reduction could amount to a saving as much as five million EUR over three years, and this was without exploring other possible savings that could also be added to the list!
Not to go after such savings has got to be, by any description, almost criminal. One owes it to the shareholders, the personnel, the customers and even other suppliers to ensure that your company has an attractively low cost base; especially in areas where there are multiple alternatives of supply. A company, no matter how profitable, how big and how powerful simply must look at the bottom line in everything they do except when it has a potential safety or environmental impact.
The irony of the situation was, in that very same week I heard of a brilliant commercial idea that was highly unlikely to get off the ground because of the current reluctance of banks and investors to lend to small businesses. For every Euro wasted there are many more opportunities missed.
It was then I got to thinking – five million EUR over three years, what would be the best possible way of re-investing that money? Clearly, paying out savings each year in increased dividends is irresponsible if you want to ensure the long-term growth and sustainability of your business. And because right now is as good a time as any to make savings in order to invest into smart schemes, then what? What would you do with five million EUR over three years?
Have a good week,