Control = Survival

It is for this reason that entrepreneurs everywhere need to know the value of cost control. Controlling costs is as important, if not more so than having a good sales plan. Why? Invariably as the old adage goes, what goes up must come down. This phrase is common among experienced investors that don’t lose their minds when a stock shoots up seemingly overnight to some record new high. It is also, why the same financial gurus don’t jump head first in the shallow end by buying some ridiculously over priced real estate. Around the world the same sad story has been relived by countless companies who don’t get the most basic of business principals, control costs.

The latest in tales of terrible investments was Uber’s bleeding cash in China. As CEO Kalanick shared in a DAVOS interview, Uber hadn’t seen black for some time, and perhaps was never going too, at least in the near future when it came to their China investment. When costs are soaring like an eagle in the sky, what do most savvy executives do? They cut the fat. That is, they find a way to get the monkey off their back by cost control. This comes in the form of sell-offs, lay-offs, restructures and even bankruptcy in the most dire of times. Whatever they can do to get the debt down and starting, that’s right, what a business is supposed to do in the first place, make some money.

The irony of it all is that this roller-coaster ride could be avoided if entrepreneurs had a little self-control. Instead of spending money faster than it is being made, control costs. This should start from day one and stay in the fore front for the life of the business. Instead, the best of the best often fall prey to the same mistake. When a big influx of cash comes in, be it because of record sales or some sort of funding, they go and spend money like wild-fire. They ridiculously rationalize it as “marketing” or even “expansion”. In reality it is just bad business. Before a dollar is ever spent, let alone hundreds, thousands or even millions, the return on the investment better be crystal clear. Plus, have a contingency, whereby if things don’t go according to plan, the company can still survive.

In many cases, this is where cost control saves lives. As markets morph from bull to bear, the veterans know how to tighten down the hatches and weather the waves of financial insecurity to come. Entrepreneurs need to ask themselves, how long can they survive with little or no income? Chances are, most businesses won’t last for long. Why? They are burdened by heavy debts in the form of advertising, payroll, and rent. Sure, these are standard operating expenses for any business. However the key to cost control is how to get each of these things done at a reasonable rate.