Cutting operating costs - its like pruning a rose bush

A fantastic article in the Telegraph this morning is full of rich content for business students…

The article explains the approach being taken by a family-owned haulage business in the face of the worst downturn they have ever experienced. The business is Bird’s - a haulage operator with 126 vehicles delivering goods for automotive, food and leisure industry customers. Bird’s seems to be very well managed. It has no debt and it owns its key fixed assets. However, it operates in a highly competitive industry which is suffering from a substantial fall in demand across the sectors it supplies.

What is the business doing? Essentially it is cutting its operating costs to reflect lower demand + focusing on managing its working capital (particularly trade debtors).

I’ll leave you to look in more detail at the approach being taken.

However, I was particularly taken with the analogy of the rose-bush pruning. The MD comments:

“Come September the roses go and every year you cut the bush back so it blooms the next year. The secret is not to cut the bush back too far as it will not grow back or bloom.”

So cost-cutting is essential as a response to recession. However, it is important not to eliminate the essential elements of a successful business.