TOTAL REDUCTION. SERIES OF CASES ON CUTTING EXPENSES
With the pandemic on the loose, entertainment industry plunged into deep crisis. As result, we had no other choice but to find resolve and introduce comprehensive changes. For our company, it had to be the largest staff reduction in my career — something unimaginable before.
Prior to the quarantine, I couldn’t find it in myself to make such deep cuts. I would choose coping with low profitability over firing employees. But when the lockdown was announced, I realized that some of my core principles must be reshaped.
Before opening the entertainment center again, it was necessary to analyze and calculate expected profits. I was watching the foreign markets where the limitations had been lifted earlier (China, USA, UAE), evaluating all the available parameters. That allowed me to conclude that attendance rate dropped by 40–50%. However, unlike in Russia, the governments of those countries provided more subsidies for businesses and citizens, which partially compensated for income losses.
With that in mind, I predicted that my fellow Russians would begin spending much less than expected. My prediction came true, but I wasn’t too happy about it: the average bill size dropped by 20% more than I anticipated.
Having summed up observation of foreign markets and out pre-lockdown parameters, we multiplied our attendance by 0.5 and the average bill size by 0.8. Anticipated incomes amounted to 7.5–8 million rubles per months, expenses — to 12–13 million rubles.
Realistically, it was impossible to increase incomes, so we were left with our only option — cutting expenses by reducing staff.
Some employees left by themselves in the first month of the lockdown. Some others we had to fire for obvious reasons. Some of the reduced positions were in the administrative, HR and marketing departments; these positions were taken by various members of the linear staff.
Consequently, we lost half of our linear employees. There used to be 12 instructors in the field at one time; now this number is only 6, or sometimes even 4. We also reworked the system of working with Guests. The new business model looks much more viable; we even can expect increase in profitability this year.
We implemented more than 30 cases on cutting expenses in FUN24, our entertainment center in Kazan. One of our main principles of reduction was to make it «win-win»: save money without sacrificing quality. In some aspects, we became even more efficient than before!
This post in the first one in the series of materials that will allow your business to survive in the unfavorable conditions of the long and nasty quarantine.
Full list of related materials:
- 6 cases on wage fund reduction
- Staff motivation. Sharing the part of the income among all employees
- Economy, which improves the service
- Changing the work schedule
- Reducing costs for F&B (Food and beverages) purchase
- Reducing costs for the equipment rental and purchase
- Reducing costs for maintenance and administrative expenses
- Ways to increase revenue
If you feel the changes for your company are necessary, but, like me, you’re afraid of making changes or don’t know, how to make it better, you can always get advice from me or my colleagues.