Loss in any business is a major issue. No business wants to have a negative return or less profit than projected. Subsequently, many ways to reduce loss, from cost management to talent management to product management and more, have been devised to ensure that profits are consistent – and losses are low or even nil.
Below we look at three loss minimising strategies in greater detail.
Costs are one aspect of business that must be kept as low as practically possible. In simple accounting terms, the less costs a business has to incur, the higher the profitability will be. Maintaining a low cost operation also means that companies are in a stronger position to withstand an unexpected market downturn or a price decline. However, if the costs are high and the profit margin is thin it will be difficult for a business to absorb the adverse effects of a market downturn.
Product management has to do with controlling or managing the appearance, qualities and customer perception of the product the business manufactures or sells. One aspect of product management designed to lower losses is product differentiation. This is basically meeting certain standards and qualities of a product, based on what the target market specifically wants. Customers in the market are not homogeneous, thus products and offerings need to reflect or cater to such differences that occur from one target market segment to the next.
Furthermore, there are various ways of making a product unique with the intention of attracting a particular customer group. This ensures higher sales in the target market since the product is tailored or differentiated to suite specific customers and customer wants.
Alternatively, if customers seek products or services with basic functions at competitive prices, then businesses tend to use a low price strategy. A highly elastic demand for a product is conducive for lowering prices of a product, or being competitive in this aspect. The idea is that the profit per unit will be low, while the ultimate number of sales will increase and achieve an overall higher sales record and profitability.
Many businesses fail to realise how much of an impact their talent pool has on their cost-profit scale. When a business has employees that make mistakes or produce substandard service, for instance, the consequences can be disastrous. This can translate to a reduction in number of customers, decline in product and brand popularity, collapse in sales, and ultimately loss of market share. It therefore becomes necessary to ensure that a company hires the best talent and, or effectively develops the talent they already have – whichever is most appropriate for the respective skills. It has been observed that businesses which don’t invest in learning suffer from decreased employee performance and engagement, to the extent that median-revenue per staff member can in some cases be less than halved. Furthermore, cumulative time and financial resources spent managing under performers each year can translate to a significant figure, which in most circumstances could be better invested on increasing sales and developing talent in strategic ways.
There are a number of ways to curb company costs, but this has to be tailored to the cost and operational structure of the individual enterprise. This is influenced by various factors including size of business, industry, proximity to suppliers or raw materials and so forth. In this read we consider mitigating operating costs, product as well as talent management all geared towards enabling the business to curb overall expenses. When it comes to talent management, there is a fine line in terms of developing staff. While it is always good to encourage skills development internally, it is never good to hire and keep personnel that are misfits or inadequately suited to the position.
Proudly brought to you by the NSBC.