Whether it is the pandemic crisis, the economic crisis of 2008, or just companies trying to improve the bottom line, budget cuts happen.
About two years ago I wrote a cartoon depicting a CEO telling their staff that they must save money and increase profitability which included budget cuts. The next few scenes of the storyboard showed the employee talking to a vendor telling them they could reduce their spending by 30%! The employee simply responded that they were sorry, but they had no budget to pay for engagement and sent the vendor on their way. Even though it was a cartoon and depicted in fun, it was so completely accurate that people only hear what they want to hear. The CEO did not say the problem was that they were not allowed to do anything, the problem they were trying to overcome was that they needed more profit. The solution in the minds of the employees was simply to not spend anything because it would not be approved rather than looking at the big picture and trying to solve the actual problem – profit and reduction.
I call this stepping over a dollar to pick up a dime – sometimes people are so focused on the dime they see that they do not know how to adjust their focus to see the other potential around them. They would step over a dollar and not even notice it just to save that dime.
So now you might be saying, “but I still can’t get any new spend approved and I don’t want to look bad by asking.” Great point! Let’s look at it this way: You have a budget already in place and in that budget, you are scheduled – or approved – to spend a certain amount with Oracle. In fact, let us say that amount is $500,000 per year. Then you engage a cost containment company and they reduce that spend by 30% and you only pay $350,000 per year now which is $150,000 to your bottom line annually. The vendor typically is paid based on an ROI so for simplicity, we can say 20% of the savings or $30,000. Original APPROVED budget was $500,000 per year but the first year you pay $380,00 and still save $120,000 then $150,000 each year after that.
Approved Budget $500,000
Amount paid year 1 $350,000
Vendor fee $30,000
The total amount paid $380,000
When you look at this and take this for approval, are you asking to spend $30,000 or asking to save $120,000 from an already approved budget?
I know this sounds simple and I am repeating myself a little, but the hard reality is that I see this on an almost daily basis. When faced with cuts, look for the “do’s” rather than focusing on the “don’ts” and find solutions to the bigger picture. Look for ways to stop and see the dollar and grab that as well as the dime!
– By Evan Boyd, VP of Business Development
