Chapter 15 Chapter 14 Costs, one dollar saved = one dollar earned

When an enterprise is thinking about how to improve performance, it is also very important to control costs.Earning one yuan may be harder than saving one yuan, because earning one yuan may cost fifty cents, and saving one yuan is equivalent to earning two yuan.Therefore, while thinking about how to open source and expand the market, we must also do a good job in cost control.Only by establishing the awareness of cost control at each opening, starting from the details of saving one kilowatt-hour of electricity and saving one drop of water, can we effectively control costs and obtain more profits.

The managers of every enterprise are very busy, so many people often say that I don’t have time to plan, I don’t have time to think about long-term development, I don’t have time... In fact, saying that I don’t have time to do something is actually tantamount to saying: this Things are not important to me, and I don't want to do them right now.As an entrepreneur, you can do many things "without time", but "who is paying out of your pocket" is something that must take time to consider. The resources of any enterprise are limited, and where the limited resources are used will determine the future and destiny of the enterprise.Is it spending a lot of money on advertising, or is it spending money on product innovation?This is a matter of principle.Unfortunately, most Chinese companies ignore this issue.

Where the company spends its money is the most important and realistic question.We either put money on advertising, or put money on channels, or invest it in terminals, and make efforts to exchange terminals for sales.Most companies cannot have both, because they don't have enough money to take care of both sides.The most serious problem most companies are facing now is that the cost of our channels and terminals is getting higher and higher, which can be seen from the financial analysis report. For small and medium-sized enterprises, due to limited funds, it is unlikely to rely on advertising campaigns to develop the market like large enterprises, so the most effective way is to rely on product innovation to win the trust of some people.It can be said that there is an essential difference between Chinese enterprises and multinational companies in this respect.The vast majority of Chinese companies pay more attention to "stage performance", rely on "homogeneous" products to fight price wars, focus on "fooling", hoping to arouse consumers' enthusiasm through hype.However, multinational companies pay more attention to "underground work", focus on product innovation, focus on in-depth understanding of consumer needs, and hope to become the preferred brand of consumers.It can be seen that Chinese and foreign companies spend money differently in the field of marketing.

From a marketing point of view, most companies in China spend money on stage performances, hype, and finding concepts, etc. As a result, we spend a lot of money and a lot of effort, but the products have no special features, and we can only win through price wars and advertising wars. All over the world, the final result is that profits are getting lower and lower, and life is getting harder and harder.So everyone is still working hard, and the end result is that no one makes money.And you, who is taking money out of your pocket?Do you know where your business money is spent? where did the money go

Before starting a business, Mr. Guo used to be the CFO of the private enterprise, which was among the best in the industry during its heyday, with annual sales of nearly 800 million yuan.Later, the boss withdrew his capital and quit. In desperation, he formed an entrepreneurial team with the company's general manager and vice president of marketing, and registered a new company with a registered capital of 5 million yuan.The former general manager is the largest shareholder, accounting for 60% of the shares, and is a legal representative; he is the second shareholder, accounting for 30% of the shares, and is in charge of administrative finance; the marketing vice president holds 10% of the shares, and is still in charge of marketing.The three of them led the main backbone personnel of the original enterprise and started a business in the same industry.

However, the 5 million yuan was almost exhausted in less than 8 months, and then the company lost 200,000 yuan every month!what to do?After the three shareholders negotiated, they decided to continue investing in proportion to the shares to make up for losses.Therefore, Mr. Guo took 60,000 yuan from his family every month to make up for the loss, which lasted for nearly a year.He has almost spent all the money in the family, but he has not seen the light of day, and the business continues to lose money.Madam quit and gave him an ultimatum. Mr. Guo lamented that in the past, when he worked for the boss as the financial director, he helped the boss raise a lot of funds.But the tens of millions of dollars was spent by the boss in a blink of an eye, and the serious work has not yet been done.At that time, he thought that if I became the boss, I would definitely spend the money where it should be spent and do things in a down-to-earth manner.However, after starting the business, he fully understood the original boss: as an entrepreneur, there are too many places to spend money!Every amount of money should be spent, and the boss is very slow to pick, and the money will be gone soon.It’s true that if you are not in charge of a family, you don’t know how expensive firewood is, and if you are not a boss, you don’t know what it means to spend money like running water!

At the beginning, the boss wanted to withdraw the capital, and the three of them tried hard to persuade them, but they couldn't do it. The boss insisted on withdrawing the capital.In the end, the three of them discussed together: If the boss doesn't do it, we will do it!Originally, we were the ones who did the usual work, the original team, the familiar market, isn’t it just liquidity!In their plan, there will be positive cash flow in half a year, with an investment of 5 million yuan, including ample reserve funds, no matter how much they spend, they can start the company!Unexpectedly, in 20 months, after the 5 million yuan was spent, the three of them invested another nearly 3 million yuan, almost all in vain!Although there is some income, it is pitifully small.When they encountered business difficulties later, they also summed up and reflected on why the boss divested at the beginning. It is estimated that this business is too difficult to do and there are too many uncertain factors.But the real reason, they still don't know.

Only when you become your own boss will you realize that spending money to start a company is like a faucet that cannot be turned off, and the water cannot be stopped no matter what.There are too many reasons for the failure of entrepreneurial heroes, but almost all of them have a common reason, that is, the cash flow cannot be continued.Many entrepreneurs feel that the cost of starting a business is too great to be simply measured in money, but in the end it is all converted into money and turned into the direct cost of starting a business. Many people start a business by making a business plan first, making the business plan very detailed, which will inevitably involve budget issues.Start-up budget should be looked at like this: when you can earn positive cash flow with a plan of 500,000 yuan, you actually need at least 5 million yuan.The entrepreneur would say: If I plan to spend 500,000 yuan, I will pay 5 million yuan in advance, right?If you can really prepare to pay 5 million yuan, then you need at least 50 million yuan to complete your business!Why?Because the entrepreneur's courage and plan are determined according to your cash, this is called material decision consciousness.With cash, you want to do things.No matter how conservative you are, you will make plans that exceed your actual operational capabilities.Because most people who start a business are radicals, or optimists, and conservatives usually don't talk about starting a business.

In fact, it is impossible to list all the problems encountered in the business plan. There are too many changes in things, and it is impossible for you to list all the risks in the future.Is it a risk if you list them all?The risk is that you don't know or even unpredictable.No matter how detailed the business plan is, it’s only about 20% of the business itself at most.Therefore, entrepreneurship is to deal with the uncertainty of the future, and no one can tell how high the cost of this uncertainty is.In short, the process of starting a business is the process of lack of money.This is something that any entrepreneur would never have thought of when writing a business plan.When you are really short of money, you will know what it is like to be short of money; after you start a business, you will know how worthless money is, and how much money you can’t help but spend!Therefore, all the bosses in the world are "stingy" and frugal, and the so-called "generosity" is a last resort.

Some entrepreneurs will say with regret: It is only a little money, if there is a little money at that time, it will be a completely different situation.The implication is that a person is about to starve to death, and giving him a bite of food may bring him back to life.But who can guarantee that there will be no time to go hungry again?When you are hungry again, who can guarantee that there will be just one bite of rice?In fact, to be an enterprise is to ensure that every time the enterprise is starving, there will be a bite of food for the enterprise to survive.You can't guarantee that someone will always help you when you're hungry, so you have to work hard not to go hungry, and try to be as clear as possible about your cash flow.

Due to the lack of experience in starting a business for the first time, many new bosses tend to oversimplify cost accounting.One is that the understanding of the concept of "cost" is biased, thinking that the cost is the rent of the company, the wages of employees and the purchase cost of products; the other is that many hidden costs may not be calculated, such as depreciation and maintenance of fixed assets such as computers Maintenance, the time and energy consumed by oneself as a leader, etc., lead to negative problems such as the actual profit situation is too different from the expectation, and the input and output in the promotion plan are unreasonable.These problems may seem like insignificant mistakes, but entrepreneurs should understand that everything related to cash flow is a matter of life and death for a business.Knowing what costs you need to pay is a problem that entrepreneurs must face when making a budget. The nature of the enterprise is different, and the types of costs will of course be different.In general, there are the following types of costs: Productive cost, which is the compensation value of funds consumed by productive enterprises on various production factors in order to produce a certain quantity and quality of products; Labor cost, which refers to the loss of the value of various production factors that labor enterprises provide labor services and obtain various labor service incomes, and needs to obtain the transformation form of compensation value from the labor service income obtained.Labor enterprises, also known as service enterprises, refer to enterprises that use facilities with certain service functions and the skills of labor providers to provide services to users and meet certain needs; Financial cost, which is based on the historical cost principle and the requirements of the accrual system, collects and distributes the production expenses incurred according to the benefit of each cost calculation object, and calculates the consumption value of each element of a certain quality and quantity of products (or labor services) part of the compensation; Management cost, which is the cost consumed according to the needs of enterprise production and operation decision-making, cost control and responsibility assessment; Fixed costs, which are within the scope of specific business volume changes, whose amount does not directly accept the impact of output (business volume) changes, and the total amount remains constant, such as the wages of enterprise management personnel, depreciation of fixed assets, etc.; Variable cost, which is a cost whose total amount changes proportionally with changes in salespersons, such as product materials, direct labor costs, etc. Massive costs can drag down a company In the middle of 2004, Li Xiaoding became famous for being the first to enjoy the preferential policies related to the employment of college students in Nanjing.What happened afterwards?Li Xiaoding told reporters that he no longer does specific business, and only occasionally takes orders online.It seems that Li Xiaoding's entrepreneurial experience has not been smooth sailing.Let's take a look at the ups and downs of his business for more than a year, and let more people who are planning to start a business or just starting a business know what they should pay attention to. When he decided to start a business, the biggest problem was the start-up capital. With his mother's consent, he sold his house for 200,000 yuan as the first start-up capital, and established Nanjing Yiran Technology Co., Ltd. to engage in computer training and online notebooks. Sales.At the beginning of his business, Li Xiaoding believed that low-price marketing was the most effective weapon in the early stage of competition. He set the price of computer training courses at 50 yuan/half a month. Students could practice on the computer every day and get a free textbook.At the beginning, the response was good, and the number of students was also considerable.Soon, Li Xiaoding's company gradually became famous in the field of computer training in Nanjing, and soon opened a branch company.Excluding the cost, he didn't make much money, but he finally saw hope. But when the company's various tasks were carried out in depth, he found that he began to lose control of the situation, and errors in various details would rapidly expand because the problems could not be resolved in time.If there is a problem, the customer will certainly not buy it, and what is even more terrible is that when there is a problem in any link, there will be a series of problems later, which will make him overwhelmed. Before starting a business, you must think about how to avoid losing money. Li Xiaoding concluded that there is one task that is very necessary and critical in the business process, and that is to learn to control costs.Otherwise, massive expenses can drag down a fledgling company.The computer market in Nanjing is mainly concentrated around major colleges and universities in Zhujiang Road and Gulou District. In order to avoid competition, he chose Xinjiekou Commercial Center, which eventually led to excessively high rent costs.Rent, computer equipment updates, water and electricity costs, advertising investment, teaching material costs, human resource costs, etc., are difficult to do well without experience.Taking making calls as an example, the fixed-line monthly rent is 35 yuan. In order to control this cost, he switched to PHS, which can save a lot of money every month.I used to be able to spend 1,000 yuan on things I didn't need very much without blinking an eye, but after becoming a boss, I found that it was completely impossible. There are many reasons for the failure of start-up companies. Poor management, poor performance, insufficient funds, and poor cost control may all be the culprits, among which poor cost control is the most common.Taking Li Xiaoding's training company as an example, we can briefly understand the main costs of a start-up company. If you want to start a business, you must figure out where you need to spend costs and where you can save costs. There is such a story: a philosopher was invited to visit a rich friend's new home.When he walked into his friend's magnificent new house and asked his friend why he designed the living room so big, the friend said: "Because I can afford it." When he walked to the friend's bedroom, the philosopher asked again: " Does the bedroom have to be this big too?” The friend still said, “Because I can afford it.” The philosopher smiled, pointed to the hat on his friend’s head and said, “Then the hat you are wearing today is too small, you should wear one A hat ten times bigger than your head, because you can afford it." The philosopher is of course mocking him, because you can't squander it just because you have money, and buying things that are of no use will only make wise men look down on you.But for small entrepreneurs, the money is always spent on useless places, and when you really need to use the money, you will be stretched, and the consequence is to make the company face economic difficulties. In the commercial society, if an enterprise wants to continue to develop, it is nothing more than "open source" and "reduction of expenditure", both of which are not easy.Therefore, in order to save expenses as much as possible, companies need a comprehensive enterprise expense management solution to manage all expenses.This kind of expenditure management is not only to save costs, but also an important tool for enterprises to standardize management and improve operating efficiency. For expenditure management, since enterprises can improve the control of any cost expenditure through recycling, it is particularly important to analyze expenditure, formulate the most reasonable operation process and formulate procurement strategy.In addition to employee salary expenditures and investment expenditures, entrepreneurs need to analyze all expenditures.Only in this way can we find the most suitable way and way, including what to buy, who to buy from, when to buy, etc.For example, unified procurement or single product procurement, or joint procurement.After determining the procurement method, it is necessary to find qualified suppliers and conduct business negotiations.The next step is the execution of the contract and the payment of the payment, and finally the process and system for long-term and effective management of suppliers. The ultimate object of cost management is the outflow of funds.However, specific to the cost management system of each enterprise, the objects of cost management are still different.The cost management of traditional simple processing small enterprises is limited to simple cost calculation, and the object of cost management is also limited to the capital expenditure that occurs within the enterprise.In order to win the competition, a large enterprise that is in fierce competition must pay attention to its competitors and all potential stakeholders. Therefore, its cost management objects have broken through the boundaries of the enterprise. All capital consumption related to the business process Belongs to the scope of cost management. Generally speaking, cost management should mainly start from two aspects: one is sourcing.The so-called sourcing means that enterprises need to understand where every penny is spent, which supplier they are cooperating with, and what the enterprise can get after the money is spent.Another aspect is procurement execution, that is, how to standardize the process and manage the contract to ensure that the enterprise maintains the benefits obtained in the sourcing process during the execution process. The issue we are going to talk about here is "seeking the source". Entrepreneurs need to know where the so much money spent by the company goes, and then they can make plans.Without a good plan, it's easy to spend money on things that don't matter, only to find that you have no money when it's time to get down to business.In the early stage of starting a business, entrepreneurs generally do not have too much disposable funds at hand, so we must keep in mind the principle of "good steel is spent on the blade". spend your money wisely In Chengdu, there is a wholesale leather goods store opened by Wenzhou people, which has a group of regular customers.At the beginning, the shop was very small, and there was a boss from Chengdu who came by bicycle every time and bought several thousand yuan worth of leather goods.A year later, the shop of this Wenzhou native expanded, and the boss in Chengdu also changed his motorcycle, but he still bought several thousand yuan worth of goods.Two years later, the shop of the Wenzhou people expanded into a leather goods wholesale market. At this time, the boss in Chengdu drove a car to purchase goods, but the purchase volume still did not increase.Two years later, the boss in Chengdu went bankrupt due to fierce competition.The Wenzhou boss became the director of a shoe factory equipped with the most advanced production line in Italy.The two chatted, and the Wenzhou boss asked, "Where did all the money you earned go?" The Chengdu boss replied, "Didn't you see that I changed my motorcycle and car? More than 200,000 yuan." The Wenzhou boss smiled: "I used the money you bought the car to buy equipment, and the money you bought the house to expand production." This is the typical difference between spending money and not spending money.When money is spent wisely, it can maximize its value and create more wealth.On the contrary, it will not only cause waste, but sometimes even cause negative effects.In the concept of a successful person, every penny must be spent with justification and evidence, and cannot be wasted at will.Even if it costs a dollar, let this dollar play a 100% effect, and never waste money. At the beginning of its business, Ford ordered a batch of auto parts with an auto parts supplier. After the price and quality were negotiated, Ford asked the other party to pack the retail parts in wooden boxes to reduce the damage of parts during transportation and loading and unloading, and to specify the packaging specifications. Told each other in detail.To the surprise of the parts supplier, Ford's packaging specifications are very strict, and the size and thickness of wooden crates are strictly regulated.Although the parts dealers were a little dissatisfied, in order to do business with Ford for a long time, they had to follow the requirements of the drawings one by one. After the goods were delivered, Ford asked the employees to gently disassemble the packing boxes without damaging any of the wooden boards. The dismantled wooden boards were immediately sent to the newly built office building.It turned out that this batch of wood boards was used to decorate the floor of the new building. The size and thickness of the wood boards on all the packing boxes were designed according to the size and thickness of the floor boards. These wood boards saved Ford nearly 100,000 US dollars. . Ordinary people might dispose of packing boxes as waste products. Only Ford came up with such a method to convert the money into profits, which greatly saved the company's expenses.So, for an enterprise, if you earn 1 yuan and save 1 yuan, it is equivalent to earning 1 yuan. This double relationship may be insignificant for 1 yuan, but when the base is expanded tens of thousands of times, the increase The profit is not a small amount.It can be seen that shrewd "stinginess" is the shrewdness of business management. Entrepreneurship speech "Saving is earning" Like many of his peers, Zheng Liang joined the army of job seekers after graduating from university.When many students chose to go south, he chose Beidiao and found a weak current company in Beijing to do technology. The boss of the company was about the same age as him, and everyone usually played together. His later company partners, after a long talk, decided to do an online video conference together, and the road to entrepreneurship began here. After the company has been in business for more than a year, they have made a small profit.While rejoicing and celebrating, he and his partners also began to summarize the days since starting their business, and also made further thinking about the company's development. His biggest feeling is: saving costs is equal to creating profits.In the past, he always thought that wasting a few kilowatt-hours of electricity and a few sheets of paper was not a big deal. It was not until he really started his own business that he realized that for a small company, every penny saved is too important.When the company just started to operate, the four of them (Liang Zheng, the partner, and two other employees) were equipped with four PCs, two notebooks, and one laser printer.The six computers and one printer are turned on all day long, including the lights in the office. This group of young men often forget to turn them off after leaving get off work, leaving them on overnight.It wasn't until it was time to pay the electricity bill that Liang Zheng discovered that his company's electricity bill was twice that of the company next door!They began to realize at this time that, in a sense, waste is a big obstacle to the profitability of small companies! Reducing costs is a relative increase in profits, so the company began to focus on cost savings.It is necessary to turn off electrical appliances that are not in use in time.Among other things, they turned two computers out.Originally they used an HP2014 laser printer, but that was a black and white printer. When the company needed color printing, they had to go to an outside printing company, which was very inconvenient, so it was necessary to purchase a color printer.However, the price and energy consumption of laser printers are too high, so I bought an Epson inkjet printer C110 with a speed similar to that of laser printers. The energy consumption of inkjet printers is really much lower than that of laser printers. The electricity consumption is less than that of 2014, and the ink cartridge is much cheaper than the toner cartridge.This saves a lot of money!In addition, he found that inkjet printers do not pick paper like laser printers, and the used paper can be reused. When printing not very important documents, everyone will use the back of the used paper.I even saved a pack of copy paper every week!At the same time, the office adopts a duty system, and the responsibility is to turn off the lights, computers and printers, which can save at least 10% of electricity bills in one month.Entrepreneurship is difficult, and saving is equal to earning, and it is still a net profit.Therefore, of course, the value of this careful calculation should not be underestimated. Ma Yun once said: "The successful strategy of a small company is two words—survive and make money. Survival is especially important." Small companies need funds and profits in order to survive at the beginning of their business. Don't underestimate the importance of saving. I believe that the above cases have great inspiration for entrepreneurs who disdain saving. Profit is not just a matter of the production and sales department, but a matter of all departments and personnel in the enterprise. Any department and personnel are closely related to the profit of the enterprise, such as the control of raw material prices in the procurement process, the turnover and utilization of inventory items, and the saving of office supplies All of these affect the company's profits.Every member of the company must establish a strong sense of profit, fully understand the causal relationship between personal activities and company profits, strive to create profits for the company, and try to prevent profit decline. A successful entrepreneur once said that the profits of a company are saved bit by bit.McDonald's is a world-renowned big company, and it is still able to control costs from scratch in daily operation and management.For us small capital entrepreneurs, it is even more meaningful to start small and take saving measures.At the beginning of starting a business, it is generally a business with small capital and low profit, so we pay more attention to taking saving measures step by step.Moreover, entrepreneurs should not only ask and emphasize others to save money, but also need to develop the habit of saving money. If everyone works together, it will be more conducive to the survival of the company. Enterprises are social organizations with the purpose of making profits, and they pursue the maximization of operating profits. The ultimate goal of carrying out various activities is to maximize the value of the enterprise, and cost control is an important means to achieve this goal.For small and medium-sized enterprises that lack capital and experience, cost control is the key factor for enterprises to obtain profits and even survive. Reducing costs can increase profitability, enhance product competitiveness, and expand market share.To reduce costs, scientific cost management is necessary.McKinsey once commented on Chinese companies: "The giant with cost advantage is the dwarf in cost management." In fact, cost control is an art of spending money, not an art of saving.How to spend every penny properly and use every resource of the enterprise where it is most needed is a common problem faced by Chinese companies in the new business era, and it is also a problem that entrepreneurs with small capital need to take seriously . Entrepreneurs who do everything possible to save money Ryan P. Allis, 23, and Aaron Houghton, 27, had the idea for iContact while in college and formally launched the electronics company in 2003. Email Marketing Services Company.Ellis recalled the early days of the startup: "We lived in the office, slept on futons, cooked on a grill, and ate a lot of ramen. It was a typical entrepreneurial life experience." "We do everything we can to save money and increase revenue," he said. Ellis said one of the things that stood out in particular was rummaging through boxes of office chairs that other people discarded, just to get them A $50 discount from Staples. They learned to negotiate and haggle over everything from technology costs and business account charges to web designers and printing companies. "Just because something has a price tag on it doesn't mean there's no room for bargaining," Ellis said. "The worst thing they can do is tell you 'no,' but too many of entrepreneurs don’t even ask if they can still bargain. It’s easier to negotiate if you’re paying in cash.” In addition, they know how to seek cheap technical tools.There are so many low-cost and free software solutions out there, all they have to do is look for them. 10 years ago, online marketing tools were rare and expensive, and now they are getting better and cheaper.They use all the technology they can find to build and market their business cheaply -- from blogs to email news lists, and have many of the same advanced technologies as those of the bigger, deeper-pocketed companies for a fraction of the price. Today, iContact has annual sales of about $15 million. No wonder their company thrives, you can tell by the way the duo keep costs under control.They do everything they can to reduce costs, and those become the initial profits.In business and in life, spending money wisely can save you more money to grow your business.And not only to save a lot of money as much as possible, but also to be able to accumulate a little money into a lot. During the startup period, the company is likely to grow slowly, so if you can do something for a dime that should be done for a dollar, then that is a huge advantage.Here are some tips for reducing costs: (1) Office location.Where you work usually determines productivity, but you can also make do with where you work.When renting a house at the start-up stage, you can also negotiate with the landlord to see if the rent at the beginning of the start-up can be waived.For companies that have started their business within one year, many office buildings are willing to lower or even waive the rent. The purpose is to attract more companies to rent out the office buildings. (2) Equipment and services.From file folders to computers, all belong to office equipment, and everything from telephone bills to company consultant fees belongs to work service expenses.All of these items have room to reduce their costs.Where possible, buy office equipment in bulk.Rent if you can, and don’t buy if you can’t.By making equipment and services as variable costs as possible, fixed costs can be reduced so that overall costs only rise when revenues rise. (3) Employees.Perhaps the biggest challenge entrepreneurs face is how to control employee wage costs.Although competitive remuneration is an important way to attract outstanding employees, attracting employees does not necessarily have to be achieved in the form of wages.Remember how you turned fixed costs into variable costs?It also applies to employee compensation.Employees can be provided with less wages, supplemented by health bonuses based on the company's income; some additional benefits can be given to employees, such as flexible working hours and the like.They can also be trained so that they can handle their responsibilities with ease; and take time to give employees some feedback and recognition.But no matter what, when dealing with employees, the wages that should be paid must be paid on time, and don't try to save money. marketing.To make money, you must first spend money, but in fact, you can do marketing well without spending a lot of money.One of the cheapest and most effective methods of advertising is word of mouth, but this method requires a lot of networking.Participate in business events and community events to promote your business, and don't forget to focus on the most ideal customer groups.Keep creating opportunities to become a compelling speaker; keep attending trade shows, even if you can't afford to rent a booth; and don't forget the value of earned media.Try PR yourself, at least at first; call the editors of important journals in your field and let them know you exist; Even one or two reports can bring a lot of business to the company. In order to minimize the cost of the start-up stage, in addition to the points introduced above, entrepreneurs need to constantly reflect and be creative.As your business grows, you'll find that the skills you acquire early on will go a long way toward driving your business' growth and success later in life.