Each dollar you spend can be looked at in two ways. First, you could improve the bottom line by spending less and allowing more income to flow through and improve the end result (profit, deficit, savings or surplus). Or, you can spend wisely now for better results in the future.
There are two very significant things happening now (I.e. this week) that come together & present a rare opportunity. The first is pressure on business and governments to manage money in a tough market. The second is the slow down in “business as usual”, leading many people with unexpected capacity/time on their hands.
In times of pressure (supply delays, market changes, global challenges) businesses, organisations and governments will look to the bottom line and make decisions to protect and improve the results they want.
The challenge when you save one dollar is that the highest possible impact on the bottom line is one dollar of improvement. But if you spend one dollar wisely, the return could be multiplied.
Fans of Daniel Kahneman will know about his Nobel Prize winning behavioural economics research, “Prospect Theory” and how it impacts markets. Worth a read, here’s a summary – https://en.wikipedia.org/wiki/Prospect_theory
Reading the newspapers and talking with clients this week, one thing I’m hearing is people anticipating more time on their hands when normally they don’t have enough time to get things done.
Maybe instead of taking time off and reduce spend, there’s an opportunity to invest in improvements that will see you leap above the pack when the short term challenges pass. The alternative (which I recognise is the only choice for some) is to hunker down, minimise spend and survive to live another financial year.
If you had a choice, how would you prefer your customers to view you when the market bounces back? Healthy and ready to serve them because of your smart investments, or survivors who hung on defensively, now needing to rebuild?
These might not be choices you are in a position make, but if you are, what’s the level of return you would expect before you’d spend a dollar rather than save it?
P.S. There’s a provocative point of view that cost cutting should never be necessary; that the only good reason to ever spend a dollar is to invest wisely in future returns. Anything else is wasted spend and should never have happened in the first place and spending less than that is reducing future potential rather than balancing things out.
STRATEGY CAPABILITY COACHING 