To: All Sbus
Date: August 29,2026
Thru: Madel, admin plan and handbook blogs
SUBJECT; Value of COST REDUCTION IN BUSINESS
Objective: 1. To teach staffers on how to elevate oneself from employee to businessman
2. To teach staff on how to create wealth
3. In creating wealth we advance humanity - we continue to pay wages, suppliers
Background 1. We continue to see signs of waste
1. Employees not working properly lack of quality in work;
2. Accidents due to non observance fo procedures and /or key points
3. Non completion of tasks
4. Absences and tardiness
5. Lack of communication
6. Early destruction of equipment due to non observance of correct use
7. Non revenue generation of asset acquired for new project delay in construction and lts
8. Non repair of serviceable assets. (or delay thereof)
9. Leaking faucets, uncollected fees for water from grass mainteners
10. Luxurious spending,wasted food on banquets
11. Anomalies in sales, giving of commissions to ghost agents.
REPOSTING OF INJUNCITONS ON COST REDUCTION
1. Cost refers to funds that goes into the product and working capital cycle; expenses are flow of funds that escape the working capital cycle and are lost forever
2. Basic equation of business is SALES - COST = Gross profit. So you increase Gross profiit but either increasing SALES (SELLING PRICE OR VALUE OF THE PRODUCT) or
decreasing Cost (materials labor, money, making process faster and costing less)
GOOD MANAGEMENT WOULD THUS:
1. Focus on sales and in operations - efficiency (Principle No. 2)
2. Invest (borrow or require equity investment( in activities that focus on sales and reducing cost
Sales: 1. Expansion of product range
2. Increasing price
3. Increasing product value
4. Invest in geographical coverage
5. Increasing quantity of product produced
6. Investing in hiring, training of sales personnel, in ads
7 Investing in continuous training of staff on product quality and customer service
Cost: 1. Reducing theft of cash and goods
2. Reducing utility and electricity cost
3. Reducing OT, inefficiency by setting metrics and production goals
4. Invest in automation mechanization - no OT, no leaves, no drama, no insubordination
5. Reduce errors, defective products, delayed deliverires, unsafe practices (OUTPUTS OF QUALiTY DOCSMN)
5. Outsource, offshore to reduce further costs
6. Monitor small leaks in the company: small holes sink a ship
7. Invest in CCTV, biometrics for attendance Reward early birds
8. Read train people on cost reduction (see cost reduction measures at our handbook)
9. Hire very well: select good employees who are reliable, trustworthing and consistent, thinking and act...
3. Cost reduction is marketing in reverse. How? By reducing the amount spent for cost or expenses, you dont have to sell additional units.
Say you saved P10,000 and your gp rate is 5%, that means to say P10,000/0.05 = 200,000! and if you are selling P50,000 per unit, that means 4 less units to sell
The amount you saved by scrimping is also the amount of sales you save in selling, and of course, reduction in inventory
4. Hire train well on quality and cost consciousness
5. Inculcate in your staff the importance and how to create wealth: increase sales and reduce cost. Always align with those two goals...
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