Last week I wrote about the “eliminate, automate, delegate” framework. Today I’m going deeper into the “eliminate” aspect. Here’s what’s in this post:
- Why you might consider an elimination campaign in your business
- How to identify tasks or projects for elimination
- How NOT to eliminate
- How to produce tangible financial results by clicking “delete”
- Real examples with numbers
- A playbook for how to proceed
A lot of smart people believe that we’re likely heading into a recession. If that is indeed where we’re headed, it’s crucial to make the most of your resources and avoid wasting them on projects that don’t yield results.
Eliminating and automating in an economic downturn will help your business navigate through tough times and set your organization up for accelerated success when headwinds shift to tailwinds. But even in the best of times, I loathe waste in a business and you should too. The numbers prove it and I’ll explore some below.
During the GFC, I had a front-row seat as an auctioneer working for major regional and community banks foreclosing on loans to businesses and commercial real estate investors who had gotten in over their heads.
I saw up close and personal how the complacency and excess that developed during the bull run left many unprepared for the low tide of the market.
One of the simplest things you can do to defend against a changing tide is to eliminate waste and cut costs. As my MBA friend Bill likes to tell me, the fastest way to increase profitability is to reduce expenses.
Too often, however, I see businesses target the whole of their sales and marketing budgets when the pressure hits. I suspect that’s because most businesses don’t have good systems in place to identify which part of their marketing budget is driving a return and which part is wasted.
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”John Wanamker
Snuffing out your sales and marketing can be disastrous for a business, especially in a recession. That’s why the evaluation step of Evaluate, Eliminate, Automate, Delegate is so important – I mentioned that step before right?
If you struggle with how to track the return on your marketing spend reply to me, maybe we can talk about it.
🪓 Here are a few examples of what I axed, why, and the results.
I’m not suggesting that these are the same things that you need to cut. That’s something to determine after your own internal analysis. And today I’m only talking about the sales and marketing but we also took the hatchet to some other areas that maybe I’ll cover in the future.
Content hamster wheel 🐹
Like most businesses creating content as a cornerstone of their marketing, we were publishing multiple pieces per week. But when we dug into our analytics, we discovered (no surprise) that 80% of our traffic was going to just 20% or fewer of our pages. Nobody cared about our multiple weekly news updates published to the blog – they weren’t driving traffic, they weren’t being read, and they weren’t converting customers.
Traffic was one of our Dashboard numbers – the numbers everyone in the department sees every single day – for the marketing team but it wasn’t until we applied content grouping and some other more advanced analytics that we really got an understanding of where we were going wrong.
Here’s what we did:
- Set a policy that we only publish the best content on the web for a particular topic, intent, or keyword – no more content for content’s sake.
- Deleted more than two-thirds of our articles (nearly 400 articles at the time) – any content that was cannibalizing better performing content got rolled up and consolidated to augment the superior piece
- Refocused our content strategy so that we were updating our existing cornerstone articles on a monthly basis only if their search rank was challenged.
Monthly Savings: $1,800
We reduced our time and expense, and our traffic actually INCREASED with our new focus. I’ll go deeper on this system in the future. We continued to get in front of our customers and prospects every single week, and very effectively at that, but that too is a story for another post.
I love podcasting. Don’t get me wrong, a podcast can be a powerful marketing channel. The problem with the particular podcast that I was running was that we couldn’t point to any results for the business. Finding and scheduling guests, recording, editing, and then distributing the pod for a twice-monthly podcast is a lot of work.
Although it was great for my guests to get in front of our 25k email subscribers, analytics showed that it probably did nothing for our bottom line at all.
Here’s what we did:
- Paused the podcast for 3 months
- Monitored change in customer retention, sign-ups, and traffic through our Dashboard.
- Determined there was no impact.
- Poof, it was gone.
Monthly Savings: ~$800 plus my time (is there anything more valuable?)
So here’s the financial breakdown from this marketing elimination plan:
- Monthly Savings: $2,600 (plus my time and that of my marketing manager)
- Annual Savings: $31,200
So now I have some choices. I can invest that money in another growth experiment like PPC, or YouTube ads, or anything really and see if I can turn it into $5,200 per month.
Or, if I’m thinking about selling my business in the next 1-3 years I can forgo the marketing experiments and add $31,200 to my bottom line which I’d take as dividends.
But that’s not all!
I just increased the value of my exit by a multiple of that new dividend income. As a boutique SAAS business the multiple I got was about 4.25 on SDE (not the 6-10 for bigger SAAS but higher than traditional businesses of similar size).
- $31,200 * 4.25 = $132,600
Add these together and in one year I’ve realized a real cash return of more than $163,800 by NOT doing things (actually I sold about 18 months later so maybe a little more).
But wait there’s more!
📈 In this case I also had the added benefit of increase traffic after the consolidation. I don’t have the precise figures anymore but even a modest traffic bump of 2 or 3% goes straight to the bottom line because there is no ongoing cost to deleting things.
But the wins keep coming!
In addition to the time savings for me and my marketing manager, the bonus dividends I’m receiving, and the value I just added to my exit I also get the benefit of having a simpler business with fewer processes and one that is less dependent on me.
Now the acquirer doesn’t have to think about how they’re going to take over this podcast or determine how much of an impact it would have if they changed hosts or stopped altogether so I’ve removed that risk and they don’t have to run the weekly content process and hire or manage writers.
So eliminating waste from your business isn’t just a savvy defensive move for uncertain economic times; it is a strategic move that can improve your bottom line, give you and your team back resources plus increase your dividends and the eventual exit value of your business.
Its important to note that the only reason I was able to identify and eliminate these was through careful analysis. If you’re not collecting data on how you and your team are spending your time and the impacts on your business, then you are flying blind, and cutting indiscriminately could be disastrous.
- Review and refine your time and task tracking: Revisit the data you collected after our previous post and analyze which tasks are least productive, are resource-intensive or are of dubious value.
- Have key roles start tracking their time: Just as you have tracked your time now its time to ask your key players to have a look at what they’re doing. You might find resistance if you haven’t asked this kind of thing of your team before. Assure them that you’re all working together to build a more resilient organization.
- Assess the value and impact of each task: You may need to pause, identify metrics, and implement some more complex analytics to understand the value of the projects and tasks your team is involved in before you do anything. Measure twice, cut once. Don’t skimp on this step; take a hard look at where you’re investing and demand accountability.
- Use your gut: Are there operations in your business that you have a sneaking suspicion are of diminishing value? Brainstorm ways to test your suspicions.
It can be scary to click “delete”. The best way to do it, especially if you have dubious analytics, is in such a way that you can reverse your decision if you made a mistake.
- Test the impact of eliminating tasks: Temporarily stop performing certain tasks that may be less valuable, especially during an economic downturn. Measure the effects on your business performance, productivity, and resource allocation.
- Eliminate in stages: If you stop doing interconnected tasks all at once, then you will have a hard time determining which elimination had an impact. Identify and stop the most egregious waste first.
- Work with your team: Once you start asking people to stop doing things, they might get nervous about job security. The truth is that you may in fact find that you have people or roles that you do not need anymore. Determine if it’s possible for those people to better serve your organization elsewhere.
Organizations that survive or even grow during economic contractions emerge more resilient to all types of challenges. Increasing your margins by eliminating non-productive spending will make you more profitable and increase your enterprise value.
It can be hard to make changes in an established business, so do it thoughtfully to avoid causing disruptions. Demand that the time and resources you’re investing demonstrate a return. Cautiously and then with conviction eliminate anything not pulling its weight.