Hello,
I want to tell you about an orange tree my parents used to have in their yard - it never produced a single orange.
It never occurred to me that this was because of the ivy that covered every part of the tree, but my father made the connection and one day he attacked it with a pair of gardening shears.
One vine at a time, he peeled away the strangling layer of greenery to give the tree its first clear breath and unimpeded glimpse of sunshine in years.
Shortly after this remarkably simple action the tree grew the first oranges I had ever seen it carry and the next season its branches were bowed under the weight of fruit.
Over the past weeks we’ve been talking about the things you need to cut out of your life and business to succeed in both.
Already, we’ve looked at ways you can rid yourself of the people and habits that can hold you back and this week it’s time to examine the overhead costs that can prevent you advancing to your full potential.
Much like the ivy vines on the orange tree, overhead costs are a parasite that can suck the life out of your business and leave it infertile.
The goal of every business is to make a juicy profit but it’s easy to lose sight of this if your business becomes a breeding ground for blood-sucking leeches or a holiday camp for idle employees.
Every year the Australian Consumer’s Association releases a report that states, from memory, that the average Australian spends 105% of their income each year.
The best way to shift that margin is to cut back on expenses.
In the first decade of the sixteenth century Michaelangelo stood in front of a shapeless block of marble with a chisel in one hand and a hammer in the other.
Over the next four years he gradually chipped away pieces of superfluous marble until he had finally revealed one of the greatest artworks in human history, the statue David.
It was by subtracting, rather than adding, that David took shape and that’s exactly the same approach you need to take to you business.
When it comes to overhead expenses, less is definitely more.
So where do you begin?
Well, as is so often the case, the best place to start is also the most difficult.
Take a close look at your staff, keeping a careful eye on their productivity and what we call “billable” hours.
Every minute they are clocked onto your pay roll they are draining money from your business – how much of that time do they spend doing something that will put money back in?
To ensure efficiency you should outline clear job descriptions, set key performance indicators and put time limits on every task.
If a staff member is not performing properly, you need to be as ruthless as my father was with the garden shears.
It can be very hard getting rid of staff, especially if they’ve become personal friends, but in business there’s no room for fear, guilt or resentment.
You have an obligation to yourself, your family and any stakeholders in your business that far outweighs the sentimental attachment you may feel for somebody you drink with on a Friday afternoon.
If you really can’t stand to sack them, try moving them to part-time or outsourcing their position.
Something else that often makes employers hesitate before releasing staff is that it can hurt your business in the short-term, as even the worst employee adds something, no matter how minor, to the value of your company and it will take time for you to find and train somebody new.
That temporary pain, though, is entirely worth it in the long run.
Keep in mind that pulling the ivy away from the orange tree tore off much of its bark and some of its flesh, but that damage soon healed and was entirely forgotten by the time Mum was making fresh juice each morning.
Realistically, there’s no part of your business in which you shouldn’t be able to save money.
Talk to your landlord to see if you can get a rent reduction and, if not, look around for a cheaper business premises.
Also, you should examine your phone bills carefully as money can haemorrhage down the phone line faster than water down a drain.
Consider shelving your mobile phone or using it only for incoming calls and look into some of the amazing options that are available today with new and ever-improving technology.
Telecommunication has become a highly competitive business since deregulation and you will likely be rewarded for shopping around.
It’s a similar story, though to a lesser extent, with power bills.
Insurance is another place you can save money, as a lot of people spend more than they need, or even realise, on various different types of cover. Maybe there are policies you can improve or let go of altogether?
Once you recognise where your liabilities are, ingenuity becomes the name of the game.
Think outside the square and never lose sight of the ancient adage that a dollar saved is a dollar earned.
Of course, having said all that, I want to make it clear that I’m not advocating slash and burn economics.
I believe in abundance and I believe in having no limits but you have to start small and grow sensibly.
Overhead costs are the enemy of business and you need to wage war against them with the same vigour that my father attacked the strangling ivy.
Otherwise you will become overwhelmed by overheads and your business efforts will be the same as that orange tree was for so many years – entirely fruitless.
ACTION STEP:
Similar to last week, I want you to make a list on a sheet of paper or in an Excel spreadsheet – this time of all the overhead costs and expenditures of your business.
It may not be an easy task, so keep in mind that many of your expenditures will be calculated annually or quarterly.
Once you have done that, clear yourself of all emotion and ruthlessly run through the list to prune out everything that is not essential.
Now go through it again and think hard about ways you can reduce the remaining figures.
Only when you have cut your overheads down to the absolute minimum will you and your business be able to breathe freely and prosper.
Stuart
