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Why business sense trumps financial sense every time

A business thought experiment:

You are the owner of an established business that generates a million £ in revenue. In your industry the profit margins are well-known, and you hit your numbers regularly. While planning for the next year, your marketing team advises:

“Invest 100K in additional marketing and increase revenue to 1.5 million.”

In the meanwhile, your accounting team comes up with a different plan:

“Save 100K by reducing the marketing budget, keeping your revenue at 1 million”

What would you do and why?

This is a dilemma that every business owner faces. Cut costs or invest on growth? Let’s now add another variable to this – we’re presented with a pandemic and a prolonged lock-down, that has made everything even more unpredictable.

We could take a lesson from the following facts:

Kellogg v/s Post. The cereal war:

Kellogg and Post were two companies competing for the brand-new, ready-to-eat cereal market when the Great Depression of 1920’s hit. Their responses to this challenge were completely different.

Kellogg doubled its marketing budget and began radio advertising to promote its brand new product. On the other hand, Post cut back on all expenses including its marketing budget. Consequently, by 1933 Kellogg became the market leader and increased its profits by nearly 30% while the rest of the economy took a nose dive!

While it may seem prudent to take a conservative approach and reduce costs to gain better control when times are tough, it might actually be a much wiser decision to invest in growth that could sustain the costs.There is plenty evidence to prove that not cutting back marketing budgets, or even boosting them during tough times is a better approach to ensure growth, resilience and profits in the long term.

One of the biggest advantages of business in current times has got to be digital marketing. With the ability to target your exact customer segment, this could be the one easy way to please both – your accountants and the marketing team.

Business sense beats financial sense every time!

It is easy for a business to be so focused on reducing expenses that they forget that there is a better option available. Good financial sense may save you money in the immediate, but good business sense will give you growth in times to come. The growth approach will triumph over the cost-cutting approach every time!

Get in touch with us at AtulaTM Technologies Ltd to find out how we can help you grow by increasing your revenues, with a thought-through prudent approach. A clear middle-ground balance between business and financial sense!