Tactic #2 Expense Management - Re-Margin Your Business
To shift is to change.
To profit fast - cut costs
No 1 determinant of thriving: lead generation
No 1 determinant of survival: expense management
First change when market shift is re-expense. Generate more income impossible in short term
Time + costs
To generate revenue you generate leads. To make a profit you manage expenses.
The profit you seek will always be made in the way you manage your money. So when the market shifts, you must create a budget that matches your revenue. We call this re-margining your business.
Fear of financial loss is a more powerful motivator than the opportunity for financial gain.
“Name a business that has been ruined by downsizing. I can’t name one. Name a company that has been ruined by bloat. I can name dozens.” - Charlie Munger
In up markets we tend to move fast and swell up. We’re not as tight on our dollars or as tough on our results.
When you invest you expect to get your money back plus a return. And the same applies in your business.
In a shifted market you drop your expenses until your inflow once again exceeds your outflow at an acceptable level and then you play red light, green light.
Fixed costs to variable costs / performance based
Re-budgeting is your first issue and if you don’t get it right it just may be your last one too. Cut expenses first—find your margin fast.
Define a benchmark dollar result you should expect from every dollar you spend and until you get that result don’t spend any more.
To be an effective money manager you must be a “budget bully.” Challenge everything and make nothing sacred. When you lead from a position of profit your world is full of possibilities.