One of the best things to think about is your breakeven point. You know, the amount of cash required to breakeven, the point where you start making money on a monthly basis. We all have this number blazed into our brains and check it when we review our weekly and monthly financials. How to take this review to the next step is where the exercise becomes fun.
The first step is looking at how you can reduce your breakeven point. What expenses can be eliminated or reduced. You notice the first step is elimination. Use critical analysis to find creative ways to eliminate the root cause of the expense. We often assume everything done in our organizations is necessary, but when you challenge yourself to really look at what tasks create more customers or increasing sales to existing customers, you will find there are many outdated methods and tasks that can go away. The next step is finding out what you could reduce or outsource to a least costly way of providing the service and or products that do produce revenues.
The second step is where the fun part begins. Assume for a minute that your monthly revenues will decline. Let’s also assume you are looking into your crystal ball and the disrupting marketplace is catching up to you and you may experience a monthly revenue loss of 50%. What would you cut to balance your breakeven? (We realize this dramatization is drastic, but it will force you to really think hard about the process).
On the flip side of this thought process, what would you do to maintain or increase your revenue stream? We all know you can only cut expenses so far without risking long-term damage to the core business. The value of switching your thought process to revenue generation is the first step in creating a new blueprint for your organization. Start with your customers and work backward into your organization. Put yourself in your customer’s shoes and ask the hard questions to yourself to see if your existing delivery systems are designed to add value throughout the supply chain. Do you really have a quality position and pricing value that you can defend into the future?
Creating scenarios like this is the first step in the innovation process. Everything can be improved. With the rapid change in technology and global delivery systems, our challenge is keeping an open mind about making change. Exploring how you can bring innovation to managing your breakeven is a great start to begin thinking about projects that will create value for you and your customers. Have fun with this roadrubber exercise and enjoy the road. GMO