How To Cut Costs For A Leaner Agency

2018 is about leaning-up your agency and
whipping yourselves and processes into tip-top shape. Here’s how to make sure you’re doing it right, and what to do if you’re not.

By Emily Rose Dallara

More often than not, your agency may need to cut costs to really ‘smash’ it this year. So, here’s how to make sure you’re financially ripped, for your most successful 2018 yet.*

*(Without restricting your talent and falling off the wagon!)  

Bare all in deep analysis

Agency cost reduction
Image: Hello Quence

To tighten up your belt, it’s first imperative to set the groundwork. This means booking out time in your busy calendar to sit down and take an analytical look at your businesses finances as a whole (or delegate this job to accounts-sorry accounts people!)

Then, ask some questions about the data:

  1. Where are you spending in general as a business?
  2. Which departments display a decent return on investment?
  3. Are you overspending? If so, where?
  4. Are you utilising all of your resources, or do you have too many in one place?

When you have a few solid answers, contrast and compare with your expectations and goals:

  1. Does what you’re spending reflect your business goals?
  2. Are you making money back where you expected to be? If not, why?
  3. Have you over budgeted or underbudgeted?
  4. Do your project plans match with the resources? If not, are all departments collaborating as expected, or are their gaps in communication?

Really analyse your businesses’ years goals and expectations and mindfully compare to what you’re seeing on the report.

If the numbers add up and you can clearly see what’s going on, then let’s move forward. If not, you need to dig a bit deeper with those
reports by involving more than just the managerial team. Usually, the answers can be found at ground level with the people who make your business tick.

Get ripped strategically

lean up your agency
Image: Patricia Serna

Once you have a clear view of what’s going on financially in each
department, then it’s time to construct a strategy to reduce
spending and work with the new budget.

Start by ‘idea storming’ alongside fellow Directors and senior
colleagues. Initially, your first thought at this stage may be, ‘hmmm so what’s fair for everyone?’ Well, as much as you would like to think that cutting the budget in each part of a company equally, will work out best for everyone, it generally 
doesn’t.

Work strategically and play around with a few options. Focusing on departments that excel and bring in higher revenue is a great place to start. Even considering the concept of ‘zero-based budgeting’ for your agency could be part of your idea storm. Another approach we advice is to look at the capabilities of the entire team. Which talent do you have too much of and where do you need to expand? Focus on where needs fine-tuning, in each department. If you can see far too many ‘thinkers’ and not enough ‘do-ers in one place, take note.

The main aim of this process is to highlight; time, labor and
materials that are not being used effectively or are being wasted.

Properly fuel the spending machine

lean up your agency
Image: Raw Pixel

The focus when cutting spends should be what you’re putting into your business and how much. Look at what you’re cutting, don’t stress about how much you need to cut at this point.

A frequent downfall we see from businesses when trying to reduce costs is the almost habitual reaction from ‘top management’.
Usually,
management automatically looks at how much they want to save, then roll out the responsibility of cut-making to
lower management. The
risk with this strategy is that even if each department leader does have a detailed vision of what needs to
improve, using solely this strategy, could directly impact revenue
targets.  These isolated, departmental cuts are at risk of being
short-lived and not aimed at creating long-term change, instead, they’re rather, short-term, quick fixes. They’re also at risk of being the typical
financial ‘crash diet’, and we all know how that ends…

What you should do instead…

We like to be different here, so we say flip the old strategy on its head. Work from the department floor up. As mentioned, a strategy recently being used in agencies is ‘zero-based budgeting’.
Departments have to present their idea and budget to top
management. Be it; advertising spends, client entertainment or
software updates. They then would have to justify these spends with a well-forecasted ROI strategy and contingency plan. The benefits of this is that budgets are based purely on activity and more accurate forecasting and less on previous spends by the company using a set budget.

Is time wasting costing you money?

time costs money

If, after tough analysis, you’ve realised it’s specific processes and management tools wasting your teams’ time, (therefore precious money) then it’s more about improving those, rather than cutting specific departments budgets or headcount.

Hone in on creating a ‘lean’ business to save money. One that works collaboratively, transparently and efficiently. This is the time to figure out if your current systems are serving you or costing you. Are your team constantly wasting time finding documents, using multiple platforms or trying to teach themselves how to learn yet another new piece of software?

This should be apparent from the initial analysis of your spends, but if not, delve deeper. Talk to your teams individually and gain insight into what’s taking them the most time and therefore what’s wasting your precious money. What do the team’s want? More often than not, the answer is; ‘a system and/or process that is easy to use, helps us do the job and keeps everything in one place’. If this is the case, consider reviewing any of your process, operations, and resources management software. If this will take up time that could be spent moving your business forward, then external help will save time wasting and deliver you those results faster.

How to cut and become leaner for longer

leaner agency
Image: Raw Pixel

Once you’ve realised you need to skip the spends on ‘donuts’ and more on whole, quality ingredients to make your business run better, then you are in a great position to act quickly, but efficiently.

To summarise:

  • Thoroughly analyse all past department spends, current
    processes, operations, and strategies.
  • Compare to your business goals, do they fit?
  • Plan your cost-cutting strategy, considering new tactics like ‘zero-based budgeting’.
  • Consider external help to save time, money (and your sanity.)
  • Implement, review and adjust where you need to.
  • Remember, listen to your business as a whole. A holistic,
    wholesome approach is usually more effective than
    ‘targeted’ cuts.

 

For more information on making the pieces of your business work better together, contact us: info@tangramconsulting.com.au

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