Cost Management

by Brian on April 7, 2010

Everyone is familiar with Time Management and how extremely important it is… In business there is something equally important… Cost Management.

Cost Management is determining what is the most cost effective thing to do…

A lot of small business owners get way too involved and try to do everything. Delegating responsibilities to others is part of being a successful business owner.

Why do we have a housekeeper?

Her profession is cleaning – That’s what she does for a living. She is better at cleaning than both my wife and me. She is also faster at it than we are.

The most important reason we have her is for cost management.

We leverage her cost against what our time costs.

Yes, we currently live in South America so our housekeeper is less than U$S 4 an hour… So having her come to our home twice a week for 3-4 hours at a time costs us, on the high side of 8 hours, right around $30.

The question is… “Is 8 hours of either of our time worth more than $30?”

Of course… Our time is much more valuable than that.

Cost Management and Your Business.

Speaking freely… You probably waste a good amount of time every day on tasks that can be outsourced. Not recognizing and acting on this costs you money.

  • Which of your daily tasks can be duplicated and taught to someone else?
    • To find out, write down what you do step-by-step through the day. You’ll probably be quite surprised to see how many low-level tasks waste your time.
    • Once you have a list of everything that can be duplicated and taught to someone else, write down the exact steps and procedures of how each task should be completed.
  • Is it more cost effective to do task yourself or hire someone else to do them in your place?
    • For example: Hiring a Virtual Assistant or hiring an off shore call center to field your sales and customer service calls vs. handling the sales and customer service yourself.

The basic principle of cost management is… spend money to make money. It’s not brain surgery. If you can spend a little bit of money on a product or service in order to save time and bring in money, do it.

What sorts of things do you do in your business to help manage costs?

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