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  • Writer's pictureMike

Red Pill, Blue Pill (and other cost control fallacies)

What if I told you there were other options?


There's a glitch in your matrix... or at least there might be.


I'm talking about your cost control matrix of course - and that's assuming you run your cost control and investment decisions across some decision matrix.


For many small businesses - the temptation to simplify their cost-management decisions into a simple binary exercise can be quite seductive - in fact to the time-poor small business operation, it can be a bridge too far to even entertain the thought of changing cost control decisions from anything more complex than simple Yes / No exercises.


The good news is there isn't anything wrong with this. Especially when it comes to personal finances, consumer spending, and even for the Sole Trader.


There is one challenge with leaning into binary cost control approach in business - and that is too often we can end up framing the decision inside of a sneaky "Do we really need it right now?" question.


I say it's sneaky, because the framing lends itself towards painting you towards one particular outcome more often than not.


At this point, it is important to really underline that we are not advocating that you free up the purse-strings. Quite the opposite in fact.


We're advocating that you take a Procurement approach to more of your business expenditure and costs. Whether that is your fixed or variable costs.

We've touched on taking a Procurement approach to expenses and costs in another post - so we won't drill down into what it entails here, but we'll be sure to unpack this a lot more in future posts.


Suffice it to say, taking a well guided Procurement approach to your purchasing decisions moves you beyond even a 2D decision matrix, and into a 3D view of your business - providing you with the clarity needed to take decisive, fact-guided actions to grow your business.


So what I want to float with you now, particularly for those start-ups and small businesses seeking growth:


Start framing your business expenditure within a new paradigm - where you depart from the consumer (buyers) mindset of "bargain hunting", and slowly build your Procurement capability, and you will begin to recognise more and more investment and partnership opportunities, where ROI opportunities vs buying activities become clearer.


That bargain price, that decision not to invest, that opportunity unseen and declined, can more often than not come at the highest cost.


 

Our team have extensive experience in Procurement, Cost To Serve Analysis, and business optimisation consulting and development experience with dozens of businesses in NZ and AUS, and we're building a lot of freely available tools and resources for you to access here on this site as quickly as we can.


If you have anything you would like us to help with that isn't yet up on our site, get in touch with us at contact@zalense.co.nz




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