Is Your Business Running on Empty?

Several months ago in BtoB magazine, editor Ellis Booker wrote an article lamenting the fixation that American businesses, both large and small, have for being "lean." Booker's point wasn't that being lean isn't inherently bad, but that, in and of itself, leanness as a goal is simply not a smart business strategy.

Booker's absolutely correct. And in tough economic times like these, it's understandable that many business owners would try to get lean or even, given the circumstances, leaner. As Booker points out, lean management first took root in the manufacturing sector and then moved into operations and procurement. This new approach led to increased profitability. So of course business owners and consultants, driven by visions of rising profits, decided to incorporate this new mentality into their sales, IT, human resources, and marketing operations. And this is where it's all too easy to turn a lean business into an anorexic one.

There's no denying that technology has changed the business landscape. In the television hit Mad Men, a show set in a New York advertising agency in 1962, the arrival of the first Xerox machine causes quite a stir. The staff is captivated, not just by the innovative technology, but by the efficiencies it promises to bring. Back then it took several employees just to staff a small business’s accounting department. Now one person with the appropriate software generally will suffice. Don't make the mistake of thinking the technology you have now is good enough. Investing in the right IT can actually save you money in the long run.

Drastic cuts in sales departments don't work either. I've known many a business owner who, in the spirit of going lean, decided to lay off salespeople and consolidate accounts. The results, of course, will vary by industry, but in many businesses sales are driven by the interactions between the sales staff and customers. Too many clients and not enough time to build relationships with them will not earn you customer loyalty.

Entrepreneurs often target the wrong areas for cuts. We've all know business owners who decide to save money by cutting sales commissions and bonuses. Some companies do it overtly, while others think they're outsmarting their employees by setting unrealistic sales goals. In the long run, neither strategy will work. Your salespeople may stick with you in the short term, waiting it out until something better comes along. But when the economy improves (and we all know it will), they'll be out of there, leaving you with underserved and unhappy customers.

Don't be a penny-wise and pound-foolish business owner. You may think you can trim the fat by eliminating the morning donuts or the company parties, but the money you save will quickly be replaced by lowered employee morale.

I'm a big believer that recessions (or near-recessions) are actually a good time to increase your marketing budgets. While that might sound counterintuitive, it's not. While most businesses are hunkering down, waiting for the good times to start rolling again, your marketing message will be heard more loudly in the vacuum. Trimming your marketing budget (whether that means creative or staff or both) will likely hurt, not help, your business.

I could go on and on, but hopefully you've gotten the point. Deep cuts tend to have a long shelf life. They not only slow you down today, but they can keep you from reacting quickly tomorrow. Booker suggests if you're going to be a lean company, you need to be a "nimble" one as well. Businesses with some fat on their bones, Booker believes, will be better equipped to ramp up when the economy turns around. As he explains, fat is "nature's way of storing energy until conditions improve."

Of course, business owners need to be fiscally responsible. If your balance sheet is truly dire, you may need to slash wherever you can just to keep your doors open. But, like people, businesses can get too lean. Anorexic companies lack the energy and stamina to survive.

Read the BtoB article Does Business Walk Too Thin a Line?

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