What is the one thing without which no company can even exist?
Money. Yes, I am referring to the vile metal also known as cash, dough, loot, dough, cash, cash, cash...
In fact, without money, it is not even possible to start a company, let alone pay salaries and rent, purchase raw materials, invest in innovation and marketing. Any company must be able to generate funds that allow for these activities, as well as compensate those who have invested in it.
Warren Buffett, one of the richest men in the world, operates according to the following rules:
"Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1."
Now, if Mr. Buffett does not allow himself to lose money, none of us (or our companies) can surely do so. Oscar Wilde humorously wrote that "When I was young, I thought money was the most important thing in life; now that I am old, I know it is."
Since money is absolutely vital to your business, are you sure you are maximising your income and minimising your expenses? I don't think anyone can say that they are, because there are always new ways to optimise this flow, whether on the revenue or expenditure side. As specialists on the expenditure side, we see daily cases of how cost items that our clients thought were optimised actually had a savings potential of 20% or more, no matter how well managed the company in question was.
If all companies have costs where money is effectively being wasted because they are spending more than they could while maintaining service quality (we have yet to find one in the world where this is not the case), then all business owners live with 'taps' dripping liquidity on a daily basis.
Personally, I would find it difficult to leave home with a tap dripping water without doing anything to stop the loss – why should we tolerate in business what we do not tolerate at home? I believe the main reason is visibility: unlike real taps, 'liquidity taps' are not visible and so, unless we have a thorough understanding of the cost involved, we do not even know that they are dripping, or which ones are and which ones are not. That is why in strategic ("core") costs, which every company knows in great depth, waste is always much lower than in areas that are not central to the business ("non-core").
The second reason for letting some money slip away is that staff efforts are so focused on the company's core business that there is no time to devote to overheads. I confess that I have very little skill in repairing taps at home, and even if I did, it would probably not be a profitable use of my time to do it myself, which is why I call in a specialist. Knowing that, on the income side, it is always extremely difficult to sell (and collect), one of the most immediate ways to generate funds is to optimise costs, whether core or non-core. Stop your company's "blood loss" and live a healthier life.
