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Operating Costs - Local Out of Sight 2008-01-03 23:38:00 It does not have to be long distance. You could have operating cost issues right across town. It could even be walking distance. Or even just an elevator ride away. This can hit you even if you are just located locally and have no remote locations.You have grown your company. You need to add some people. You are bursting at the seams. Your lease is not up for a year or two. You decide to move a department or two to another spot for the short term.You know the additional costs of the real estate. You are fine with that. After all, you would be paying more rent if you could lease more space at your current location.But you may be missing the highest costs of all.• People- it takes your people more time to get thi Read more:Costs
, Local
, Operating
, Sight
Feel the Field Costs 2008-01-03 23:38:00 Recognize that operating costs below the margin line may be just as important or even more important out in the field. It can be much harder work to oversee the field. However, it may be crucial to bringing home positive net income from field operations. The farther away the location is, the more important this can be. If they are located in another country, this magnifies the challenge.• Know how much your field operating costs represent out of your total operating costs. Does the field get the attention it deserves from you?• Get on the road. Get there before a crisis hits. You will learn things you cannot tell from reports alone. • Build the relationships. Open up the lines Read more:Costs
, Field
Operating Costs - Company or Industry Stage 2008-01-03 17:12:28 Your company has a life cycle. Your industry has a life cycle. Your other operating costs need to fit what stage you are in. What fits at one part of the cycle can be a disaster at another.• You may be running too far ahead of your stage. You may have a dynamite marketing program but your industry is not ready yet. • You may be running too far behind your stage. You may be running a tight ship while your industry is exploding. You miss out on grabbing market share while the going is easier. You may have a better bottom line now, but it will be skinny compared to what it could be later.• You may miss a big turn coming up. You do not prepare ahead and it becomes too late to catch Read more:Costs
, Operating
, Stage
Operating Costs - Field Costs 2008-01-03 16:10:20 Your business may have multiple locations. You are located at your corporate headquarters. You may do a great job of keeping on top of operating costs there. It is easier when things are right under your nose. You can see it, you can feel it. You sense things about operating costs even before they hit the numbers in your dashboards or financials.Out in the field locations, it could be a different matter. It may be out of sight, out of mind. You may not get around as much as you should. You may not have ways to keep in touch beyond getting the monthly numbers. When the cat is away, the mice will play. It may take a crisis to get you there. By then you have spend a lot more in operating costs. You missed opportunities to Read more:Costs
, Operating
, Field
Operating Costs- Play on the Right Stage 2008-01-03 16:09:25 Get the big picture. Operate at the right level for your company and your industry.• Early Stage
. You are finding your reason for being. Now is the time to be investing heavily in product or service development. You also lay the early foundations for other areas.• Rapid Growth. You have been discovered. The market likes what they see. Now is the time to grab all that you can. You want to entrench your position. You may spend more in many operating areas to get as much market share as possible.• Mature. Now is the time to harvest. Reap the benefits of the hard work you did in the earlier stages. You can fight for more but it will have to come out of compe Read more:Costs
, Operating
, Right
Budget Smart 2008-01-03 16:06:44 Make budgeting be as powerful as it can be:• If you do not have a budget, start one now.• Add budgets to your monthly reporting package and your dashboards.• Keep your people in the loop about results against budget.• Review variances against your budget monthly. Let your people know you are watching.• Get your key people to buy in and own their budgets. Guide them on the overall revenues for the next year, but make the expenses come from the bottom up. • If your business changes dramatically from the budget, re-forecast.• If an expense is no longer needed at the same level, challenge it. Do not just spend because it is in the b Read more:Smart
Operating Costs - Budget Games 2008-01-03 15:51:21 Operating Costs
- Budget
Games
Budgeting can be a very powerful, yet underutilized
tool.
You may not have any budget at all. You just operate month after month. You may get lucky, but you may not do as
well as you could. Or problems
start, but you do not see them until they get very large.You budget your company but not from the owner
perspective. You have a net income
target but not an owner compensation target. You could hit your company income
number, but fall short on your return.
Money gets spent elsewhere before it gets to you.You have a budget but do not use it. It sits on the shelf. It does not get integrated into your
financial reporting. You lose sight
of how you are doing.You ha Read more:Operating
Operating Costs - Internal View 2008-01-03 15:50:29 You know you cannot do it all. You hired good people to run your areas. The same can hold true for them on a smaller scale. They cannot know it all themselves either. They need to have the general view, the big picture, for their department. Like you, they will have some special skills. And like you, they will have some areas they do not know as much about.As you grow, that can become an issue. Initially, some costs were too small to care about. Now you spend more significant dollars. You cannot expect your people to be experts on every cost in their area. However, that does not mean it can be ignored. Your telecom costs may have been pretty small but now you shell out a couple grand a month. You are not an exper Read more:Costs
, Operating
, Internal
Get Your Department Heads to Own their Numbers 2008-01-03 15:49:16 You hired
good people. Now make your department
heads feel like owners of their areas.
Keep them up to date on their operating costs. You do not have to share the whole
financials with them, but certainly let them see their department costs.Have them budget their numbers each year. Add this into the reporting
package. Hold them accountable for
what they planned and make it easy for them to see how they do. Make the variances visible to them and
you. They may take action on it
even before you see the need. Give them reasonable room.
Decide what they have discretion to spend on and what needs to come
up to you for approval. Celebrate and reward their successes as well.
You, your
family and yo Read more:Department
, Heads
, Numbers
No Ownership of Operating Costs 2008-01-03 15:46:56 When you are just starting out, you may have total ownership of the operating costs. The bucks stop with you. As you grow, that can change. You move from having just outside spending on information technology to having your own head of IT. Or you could now have heads in other areas, like marketing, product development, or customer service.As your company grows, you cannot do it all. Even though you have hired them, you still may not be using them well:• You may have too tight of a leash. It all goes through you still. Everything has to be approved.• You could go the other extreme. One or more department might get free rein. You end up spending money you did not realize.• Read more:Costs
, Operating
, Ownership
Grouping Operating Costs to Clearly See Spending 2008-01-03 15:45:46 If you have all your operating costs in one large bucket, like administrative costs, break it up into meaningful sections. Among the departments you may consider are:• Product or service development or research and development- depending on your business or stage, these could be very large and very critical costs. It shows you how much you are spending for the future versus operating the present.• Sales and marketing- keep track of the more fixed costs here, which do not vary automatically with sales.• Variable selling costs- commissions, credit card fees, incentive plans, royalties, advertising. These can be split separately when significant. You see how these change with sales. Meanwhile, you keep a Read more:Costs
, Operating
, Spending
Operating Costs - Grouping Well or not at all? 2008-01-03 15:44:04 Your reporting package may dump operating expenses into one large bucket. All the operating costs come down to one total, such as total administrative or operating costs. Instead, you may have split your operating costs into a couple different groups, but you still have a big chunk in total administrative costs. Or you have costs that are part of the administrative total that really belong somewhere else like marketing.• It is harder to see bigger trends by area. Are total marketing costs climbing? You may miss it.• It is tougher to summarize. Anything that is summarized to a one page financial summary is just total operating costs.• It does not match how you operate. You have different de Read more:Costs
, Operating
Financial Vertigo 2008-02-22 09:52:42 You have heard of vertigo, the fear of heights. You might be a fearless mountain climber. You scale up a cliff with hardly a sweat. Your heartbeat barely rises.
But mention finance and you break out in a cold sweat. You have a fear of finance heights. You hold yourself back.
You may say, “That is not me.” Yet you just might be doing it without even knowing i Read more:Financial
, Vertigo
Travel and Entertainment Costs Traveling High 2008-02-22 09:29:47 A close cousin to credit card costs is travel and entertainment expenses. You could be tight on your costs at home or in the field offices. But once people are on the road, it is loosen the wallet.
It can feel like a vacation to your people. They spend on things they would not normally. Or they may treat it as a cost of doing business. They are sacrificin Read more:Travel
, Entertainment
, Costs
, Traveling
Credit Card Control 2008-02-22 09:29:30 Treat credit card expenses just as seriously as you would regular purchases. While the dollars may be much less, you could save a lot of discretionary spending with little or no corporate value.
Decide if corporate credit cards are really necessary or could be cut back. Have people put things on their own credit cards and submit the expenses. When it is not as automatic Read more:Control
, Credit Card
Taking Care of Travel & Entertainment 2008-01-04 00:21:00 Like credit
cards, treat your travel and entertainment costs seriously. You may not have big dollars in T&E, but
you could be throwing some dollars out the door.
Set guidelines and stick to them. Make it clear to your people. Do not reimburse when they go astray or
you in effect set a new guideline.Follow them yourself.
Nothing hits home like a good e Read more:Travel
, Entertainment
, Taking
Credit Cards Gone Astray 2008-01-04 00:18:00 You may run a tight ship with purchasing. You compare and shop well. You have budgets and keep in line. It works well for what purchasing gets
involved with.
But then there are the credit cards. They do not follow the same controls. Money gets spent in different ways. Approvals are different and may be more
lax. The expenses hit later. You may not s Read more:Cards
, Credit Cards
Personnel Power 2008-01-04 00:16:00 Your highest
operating cost may be your people.
Certainly it can be the most powerful.
Even though they do not produce a product or service customers, your
people in other operating areas can make or break your performance.
Bring in the right people at the right level in the right
numbers at the right time. Know
your biases. Realize where you know
le Read more:Personnel
Personnel 2008-01-04 00:15:00 One of your highest other operating costs may be
personnel. Yet it also can be one of the
toughest to manage. You know what people
you need to produce your product. You
know how many you need to deliver your service.
But you may feel like a fish out of water when it comes to people below
the gross margin line.
You may under invest in some areas. You do not see Read more:Personnel
Look at Keeping Local Together 2008-01-03 23:43:00 You squeezed
every square foot out of your current space.
You have people to add. There is
just no way at first glance that you can put in one more body. You are thinking strongly about adding a
second local office and moving a department or two over there. Before you make the leap:
Factor in all the additional costs. It is much more than just the real
e Read more:Local
Operating Costs - Local Out of Sight 2008-01-03 23:38:00 It does not have to be long distance. You could have operating cost issues right across town. It could even be walking distance. Or even just an elevator ride away. This can hit you even if you are just located locally and have no remote locations.You have grown your company. You need to add some people. You are bursting at the seams. Your lease is not up Read more:Costs
, Local
, Operating
, Sight
Feel the Field Costs 2008-01-03 23:38:00 Recognize that operating costs below the margin line may be just as important or even more important out in the field. It can be much harder work to oversee the field. However, it may be crucial to bringing home positive net income from field operations. The farther away the location is, the more important this can be. If they are located in another country, this magnifies Read more:Costs
, Field
Operating Costs - Company or Industry Stage 2008-01-03 17:12:28 Your company has a life cycle. Your industry has a life cycle. Your other operating costs need to fit what stage you are in. What fits at one part of the cycle can be a disaster at another.• You may be running too far ahead of your stage. You may have a dynamite marketing program but your industry is not ready yet. • You may be Read more:Costs
, Operating
, Stage
Operating Costs - Field Costs 2008-01-03 16:10:20 Your business may have multiple locations. You are located at your corporate headquarters. You may do a great job of keeping on top of operating costs there. It is easier when things are right under your nose. You can see it, you can feel it. You sense things about operating costs even before they hit the numbers in your dashboards or financials.Out in the field locat Read more:Costs
, Operating
, Field
Operating Costs- Play on the Right Stage 2008-01-03 16:09:25 Get the big picture. Operate at the right level for your company and your industry.• Early Stage
. You are finding your reason for being. Now is the time to be investing heavily in product or service development. You also lay the early foundations for other areas.• Rapid Growth. You have been discovered. The market li Read more:Costs
, Operating
, Right
Budget Smart 2008-01-03 16:06:44 Make budgeting be as powerful as it can be:• If you do not have a budget, start one now.• Add budgets to your monthly reporting package and your dashboards.• Keep your people in the loop about results against budget.• Review variances against your budget monthly. Let your people know you are watching.• &nb Read more:Smart
Operating Costs - Budget Games 2008-01-03 15:51:21 Operating Costs
- Budget
Games
Budgeting can be a very powerful, yet underutilized
tool.
You may not have any budget at all. You just operate month after month. You may get lucky, but you may not do as
well as you could. Or problems
start, but you do not see them until they get very large.You budget your company but not from the owner
perspective. You Read more:Operating
Operating Costs - Internal View 2008-01-03 15:50:29 You know you cannot do it all. You hired good people to run your areas. The same can hold true for them on a smaller scale. They cannot know it all themselves either. They need to have the general view, the big picture, for their department. Like you, they will have some special skills. And like you, they will have some areas they do not know as much about.As yo Read more:Costs
, Operating
, Internal
Get Your Department Heads to Own their Numbers 2008-01-03 15:49:16 You hired
good people. Now make your department
heads feel like owners of their areas.
Keep them up to date on their operating costs. You do not have to share the whole
financials with them, but certainly let them see their department costs.Have them budget their numbers each year. Add this into the reporting
package. Hold them accountable for
what t Read more:Department
, Heads
, Numbers
No Ownership of Operating Costs 2008-01-03 15:46:56 When you are just starting out, you may have total ownership of the operating costs. The bucks stop with you. As you grow, that can change. You move from having just outside spending on information technology to having your own head of IT. Or you could now have heads in other areas, like marketing, product development, or customer service.As your company grows, you ca Read more:Costs
, Operating
, Ownership
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