Understand costs before cutting them
Across-the-board cuts based on the lawnmower principle frequently also hit the areas that are important for future success. We therefore first analyse which costs are fixed and which are variable, which services they make possible and where processes cause unnecessary effort.
Particularly revealing is an examination of the contribution margin, i.e. the amount that a product, an order or a customer contributes to covering fixed costs after deduction of variable costs. It often emerges that individual services or customers burden the result even though they contribute to revenue.
Starting points on the cost side
The following areas offer potential for improvement in many companies. Which of them are relevant for you emerges from the analysis.
- Purchasing: bundling, renegotiation and review of supplier relationships
- Personnel: matching capacity and utilisation, responsibilities and processes
- Overheads: rents, vehicles, insurance, services, IT (information technology)
- Processes: avoiding duplicated work, rework and idle time
- Inventories: reduction of excess stock and slow-moving items
Earnings improvement as the second lever
The earnings side is just as important as the cost side. Often prices have not been adjusted for some time, discounts are granted inconsistently or variations are not consistently invoiced. Sound costing and clear pricing rules have a direct effect on the result.
In addition, we examine whether sales is focused on high-margin customers and services, whether quotations are followed up promptly and whether existing customers offer additional potential. Small improvements in the gross margin ratio often have a greater effect than extensive savings programmes.
Measuring the effect
Each measure is assigned an expected effect on result and liquidity and is reviewed after implementation. In this way you can see which measures are actually taking effect and make adjustments where the effect falls short of the plan.
Involving employees
Employees often know the processes in the business best and know where time and material are lost. If they are involved in a suitable manner, practicable suggestions often emerge and acceptance of the measures increases. We coordinate closely with you on how and when the workforce is informed.
Frequently asked questions
Is restructuring primarily about staff reductions?
No. Personnel measures can be part of a concept, but are only one lever among many. You should clarify employment law questions with a lawyer.
How quickly do cost measures take effect?
That varies. Some measures take effect immediately, others only after contract terms or notice periods have expired. We take this into account in the planning.
What is the gross margin ratio?
The share of revenue that remains after deduction of the cost of materials or goods. It shows how much each euro of revenue contributes to covering the remaining costs.