Reducing losses in any business is important, but particularly so for a growing business.
It saves money and allows more money to be invested in growing the business.
We will discuss the need to reduce losses in the business and the various ways to do so.
We can identify losses in three ways:
- Loss of money
- The loss of time
- The loss of opportunity
Let’s take a look at each of these in turn.
Losing money: The first way we can identify a loss is by identifying the money we have lost on a project or on a business.
We may have overspent and we need to identify where we can reduce costs.
Or we may have underspent and we need to identify where we can increase revenues.
Loss of time
Loss of your time: Another way we can identify a loss is by identifying the time we have lost on a project or on a business.
This is not a question of how much time we have spent on a project, but how much time we have lost because we have not been productive or have been inefficient.
The loss of opportunity: A third way we can identify a loss is by identifying the opportunity we have lost because we have failed to make a decision, or we have failed to take action, or we have done the wrong action.
Basic principles of reducing losses
In order to reduce losses in any business, we need to understand the following two basic principles:
1. Reducing losses is about making things work.
2. We can reduce losses by managing inventory properly
Let’s examine the first of these.
Reducing losses is about making things work
The first principle is that reducing losses is about making things work
Reducing losses is about putting the right things in the right place, at the right time, to produce the right results.
The basic principle is that if we move the right things to the right place at the right time, we will not only produce the right results, but also save time and money.
There are five methods that make things work, and they are:
1. The right people
2. The right plans
3. The right equipment
4. The right environment
5. The right motivation
People, people, people
If we employ the right people, they are likely to do the right things with the right equipment in the right environment with the right plans.
The right people are the people who are motivated to do the right things because they are in the right environment, with the right equipment, with the right plans, and the right motivation
It is common sense that if we employ the right people, they will produce the right results. A good manager is able to employ the right people to do the right things in the right environment, with the right equipment, with the right plans, with the right motivation.
This is what it means to run a business.
I will examine the remaining factors in a future post, so keep a lookout!