Maximizing expenditure efficiency

You are bound to incur expenditure because expenses are inevitable for running of a business. However, are you maximizing its efficiency? Think about these -

·??????Are you being prudent with your expenses?

·??????Are you spending right?

·??????How are the significant expenses contributing to growth?

·??????Are you spending money blindly?

Let me elaborate with an example.

My coaching client, a B2C company wanted to acquire more customers to increase their revenue as the previous years’ business was affected by the lock-down. They wanted to make good the loss of revenue.?With this goal in mind, they increased their marketing effort. They spent a lot of money on different forms of marketing – ABC – Advertising, Branding (of their product) and (conducting) Campaigns. They had spent a significant amount of time, effort and money in this process. The total of the marketing cost spent was about 15% of their revenue.?It was 10% higher than their normal spending.

What do you think was the outcome of this marketing task? Here is their learning that stemmed from the coaching session:-

·??????While they wanted to increase the revenue by incurring this marketing expense, they had not set any measurable target for the sales increase.

·??????Yes, there was an increase in the top line. But the increase was only by 20% & they had hoped it to be much more.

·??????Further, the company was unable to state if this increase of 20% was because of the marketing efforts undertaken. They could not differentiate if it was in the normal course of business or because of the marketing.

·??????They realized they did not follow a clear marketing strategy.

·??????The amount was spent haphazardly and in a sporadic manner.

·??????They incurred the expenses because the company decided to spend 15% on marketing.

·??????They were unable to quantify the return on investment of their massive marketing effort.

·??????It dawned on them that they did not follow a planned way for marketing.

·??????There was no proper mechanism to measure the returns of marketing over the period of time.

The company had to pay this huge price to learn the lesson of financial prudence.

At the end of the coaching conversation, the leaders of the company agreed that to get the most by incurring expenses & to maximize the efficiency of the spend, they should follow some discipline such as:-

1.????Set relevant parameters for the spend

2.????Work on a clear strategy ?

3.????Plan and evaluate the expenditure

4.????Have realistic targets to achieve and

5.????Define measurable outcomes.

What about you? How is your spending pattern in your business?

Here are some thoughts for reflection for you.

·??????What have been your wasteful expenditure for the past 2 years?

·??????How could you have avoided these wasteful expenses?

·??????What will you do to prevent yourself from incurring similar wasteful expenditure?

Learn to maximize the efficiency of your expenditure.

PS- This article has been featured in the online magazine www.inmathi.com?& also translated into Tamil.

#business #businesscoaching #finance #management #leadership