In a climate of anxiety about the future, when whole countries are going bankrupt, it is prudent to reduce non-essential spending to a minimum. In naval terms, ‘batten down the hatches’. But random cuts based on what is easiest to eliminate are not a good idea. While a target reduction in costs is essential the specific items to be cut need to be very carefully considered. How do you decide where to slash?

This is the time for your very best – and most difficult – forecasting. Don’t worry that your forecasts do not always come true. A thoughtful forecast is always more reliable than an arbitrary or random decision.

First consideration is what or who makes the most money for you. You need to assess for each of your big profit earners:

1. How is the downturn going to affect the profitability of this important sector?
2. Is the decline inevitable or can we do something to at least reduce the impact? If, in your opinion, the decline in sales is a foregone conclusion whatever you do, don’t waste money trying to prop them up. Cut costs to reduce the losses.
3. If the record of a market is that it responds quickly to promotion or advertising, don’t chop that budget – maybe even increase it. Sales may decline but it is likely that products or services seen to be giving the best value for money, while themselves prospering, will continue to be patronised by the consumer. Value spending is as important to a company as it is to a distressed consumer – that is when the TESCO tag-line “every little helps” comes into its own. While on the subject of TESCO, isn’t it interesting that the company’s real break-through with the consumer came when it upgraded its original ‘pile it high and sell it cheap’ policy to ‘Mrs Housewife wants a more comfortable environment in which to shop’?
4. The strong profit earners need all the attention you can give them now. If they have any weak management, weed it out and put in the best talent you can. Your flagship earners have to be kept going at all costs. The companies that fare best in hard times are those that are perceived to be trustworthy and give consistently good value for money.
5. Review your assets, especially the people. Two of the companies I am privileged to help have suddenly found a new source of ideas both for expansion and for cost savings by the simple expedient of asking their staff. Not rocket science but often forgotten.

Where will the cuts be made? Obviously the under-performers will go. So will those not producing the life-blood of the business. Some of the investment in staff development may be deferred, at least for a while. Ambitious plans for development of the business will have to be re-scheduled to a time when sources of funds are easier and return can be seen to be faster.

Do not assume that only big cuts matter. Many small savings can also amount to something sizeable. Beware of cutting out those who supply the essential information on which your survival decisions depend. I have seen attempts made to reduce already sparsely populated accounts and IT operations, with disastrous results. If anything, quicker and more accurate information is the order of the day, not less or outdated or non-existent data.

Over the last few years many businesses have flourished and been extended almost beyond their capacity. This has sometimes meant that training and development has been left behind in the rush to get the work done. Normal or sub-normal working will now be more likely and this presents an opportunity to catch up with missed opportunities to prepare for new products and services.

Most important of all in the current crisis is the ability to be creative. New needs, changing markets, additional opportunities, ingenious use of senior or home workers, smart sharing of jobs and an open mind to different ways of doing what we have always been doing are all possible contributors to survival and future growth. A moment’s thought is often worth an hour’s sweat.

How soon do you have to take action? You should have already started.