Good cost reduction also requires you to view your business from a larger perspective. You need to look at your business in a global sense and see how it compares to its competitors. You must figure out how to drain unnecessary expenses from your budget while not harming your company’s fiscal well-being.

The Effect of Globalization
Should your business be expanding, then you must look even more closely at competitors worldwide, as your competition is greater in scope and your operations, and thus costs, will increase in size. Cost reduction is beneficial even when your company is performing well.

There are always extra costs you need to eliminate, and a profitable company can still be overtaxed with unnecessary financial burdens. You must always remember that thriving businesses still need strict monitoring – you must cut necessary costs in order to for your company to operate in optimal conditions.

Remain Competitive through Technology
Because of the nature of globalization, your company has competition with others from around the world, many of whom may have fewer costs. The Internet has allowed customers to conduct their own research on companies throughout the world that have the goods they want at a price they can afford, and some of these businesses may be able to out price you due to fewer labor costs, supply costs, etc.

The Internet can also benefit your company – a good cost reduction plan will utilize the Internet to best market your group. Just as your customers can look for the cheapest goods by going to a website, you too can look for the cheapest vendors and suppliers with the same tool. With the Internet and other technology, you can develop ways to distribute products at cheaper costs.

Your cost reduction plan should discuss using these technological means to improve your company’s efficiencies: computerized sales and order fillings, improved delivery channel systems; and purchase consolidations. You may also take note that some businesses still do not utilize the Internet and other technology – these companies do not have cost reduction plans that address the benefits from these resources.

Take Advantage of Available Tools
Also, by taking advantage of online technologies, you can research other ideas that companies have tested and used. A business owner’s cost reduction plan should include research about why certain methods and ideas worked and failed. This could save a great deal of time and effort as you explore cost reduction options. The Internet, among other technological resources, is now required for you to stay competitive in the globalized world, and you can use these systems to your advantage.

For example, you can research ways of minimizing your cash outlays by looking at how other companies’ turn to equipment leasing – this is a clear instance of cost reduction. This practice is being used more and more because organizations want top notch equipment without the burdens of paying for these costly items. And now you know that equipment leasing is a beneficial means of saving money, something you may not have realized had you not used your technological tools.

Good cost management requires an excellent plan. When documenting your cost reduction strategy, you must discuss your objectives and explain what you plan on doing and what kind of results you expect.

A Cost Reduction Plan is Essential
All projects require a good cost reduction plan, which outlines the activities and criteria that are to be carried out. Your cost reduction plan will discuss input and output cost estimates in addition to the amount of money needed to be spent. This strategy will help you quantify your game plan and manage you, your employees, your creditors, and your shareholders’ expectations. A good cost reduction plan sets the tone for your company, and you should take the time to brainstorm methods for cutting costs.

Your plan should discuss the reasons you are making such cuts in the first place. Is your goal to increase your company’s value? Are you trying to eliminate wasteful spending? Are you trying to increase your competitive advantage or simply just bring your expenses at the same level as your revenues?

Do you want to reduce the price of your services or products? Your plan must address what you are looking to achieve and your forecasts. What are your expenses compared to revenue and what is an ideal position? Your cost reduction plan must clearly identify a number of issues. Who will manage the costs? Who has the authority to approve or amend your budget? How do you measure and report specific cost performances.

Outline a Detailed Plan
Such information should be clearly spelled out, as your plan must address these issues so that you can reduce costs and increase your profit margins. Most importantly, your cost reduction plan will provide the planning required for controlling your various projects’ costs.

The nature of cost reduction plans can vary. Some can be greatly detailed and substantial in length. These plans can take a great deal of time to compose; however, this may be necessary for you to turn your business around. Cutting costs is no easy task as you have to be careful to only reduce costs on unnecessary items or things of which you can improve.

It makes little sense to reduce costs on essential and integral components of your business, things that you could not do without. Your plan must account for areas that you can afford to reduce. On the other hand, some cost reduction plans can be less detailed and smaller in size. It all depends on your objectives and the context of the plan, and there is no steadfast rule on how to compose your plan.

These plans can be written formally and narrowly just as they can be a little more informal and broad in scope. Depending on the experience of you and your project managers, you may not need a clearly defined cost reduction plan, though generally, the more information the better. As long as your plan discusses your goals and means to attain them, then you are at least on the right path towards creating an ideal plan.

Suppose you have a technology company and a technology (which may be a trade secret or in the stage of patenting), you need to meet an investor (whether it’s a venture capitalist or business angel). How do you protect yourself from the investor stealing the idea? A partial solution is the use of a legal document called the Non Disclosure Agreement (NDA). What does this agreement entails? Notice that I use the word partial, because not all investors like NDAs. I will discuss the possible situations where it may be or may not be appropriate to use it and provide a template for those in Singapore who might need it.

In short, A non-disclosure agreement (NDA), is a legal contract between at least two parties which outlines confidential materials or knowledge the parties wish to share with one another for certain purposes, but wish to restrict from generalized use (Source: Wikipedia). In short, it is just a piece of paper to ensure that two parties have agreed not to reveal any information covered by an agreement. If you are selling a particular product that requires protection to deal with the risk of replication by other competitors, this agreement is an essential piece of paper for you. Other terms of the same nature include a confidential disclosure agreement (CDA), confidentiality agreement or secrecy agreement.

In the case of the startups, NDAs are signed when two companies or individuals are considering the creation of a business enterprise, an investment proposal or a partnership agreement. It is required for evaluation of a business relationship as well. NDAs can also mean the following situation: either that both parties are restricted in their use of the materials provided, or they can only restrict a single party. In the case of large companies or even universities and research institutes, NDAs are required to protect privileged information that are disclosed to the employees.

Here are a couple of questions which I often encounter when an entrepreneur asks about the NDA:

Where can I find a template of an NDA that details such an agreement?: Basically, the entrepreneur needs to find an example on how to draft an NDA. You can find this URL from Enterprise One where sample NDA templates are provided. Note that it is a sample and you need to modify it to suit your purpose.

I hear from my lecturer or from some VCs that they don’t accept NDAs: From the investors’ viewpoint particularly, the venture capitalists, there are two schools of thoughts. Some VCs are alright with signing one and some of them are not. There is no hard and fast rule. So, why is it that some venture capitalists or business angels don’t like to sign an NDA? There are two reasons: first, they don’t want to be tied down because they might encounter an alternate party sharing similar technology or idea like yours and second, the arrogance that since they are receiving a hundred plans per day, what makes your plan that unique that they should sign one?Let me give you my personal experience. In the UK and Europe in general, NDAs are common, and whether you are a startup or an established company, when you need to divulge something regarding technology, a NDA is required. You can imagine my shock when I hear some local investors (but they are trained in the US) telling me that they don’t need that. So, NDA signings can be cultural in another perspective but it is an universally acceptable practice to request the other party to sign an NDA if you feel uncomfortable. You don’t lose brownie points if you ask and they reject signing it. When I do consulting or fundraising for a biotech company who needs to divulge their technology so that I can do a valuation of how much they are worth, I usually ask for a NDA so that my client will trust me to look at their company.

Why do I need a NDA?: The answer is obvious. You need to protect your company. Actually, if you listen long enough to successful entrepreneurs, the real strategy is never to protect your technology, but rather, protect your markets, i.e. create barriers of entry for your competitors so that they need a lot of time and effort to roll out an alternative product to match yours.

In practice, it’s good to have one sample NDA with you when you go out and pitch your product. Usually, some people place a few NDA papers in their brief case, so that it comes in handy when meeting investors, business partners and even clients.