Control costs before your flexibility is gone

Decision-makers in medium-sized companies are currently noticing that fundamental shifts are taking place: The cost base is growing faster than revenue. Initially, this rarely feels like a crisis. It feels more like "business as usual" – until it no longer works and the earnings crisis tips into a liquidity crisis. The real damage, however, occurs along the way: projects are postponed, decisions are delayed, and investments are frozen. Strategy becomes a calendar entry for management rather than a reality in execution.

The cost drivers come from two directions. First, from known long-term trends: energy, personnel, financing, supply chains – everything is becoming structurally more expensive. Second, from shocks that hit overnight. The blockade of the Strait of Hormuz drives up the oil price, and within days, diesel and gasoline prices in Germany rise noticeably. Raw materials become more expensive. Nitrogen fertilizer is one example of many: it is heavily dependent on the natural gas price and becomes more expensive when gas and logistics costs rise.

A similar picture emerges in logistics: since the attacks in the Red Sea, shipping companies have been avoiding the Suez route, taking detours around Africa, transit times are increasing, and freight rates are multiplying. For a medium-sized importer, this means in concrete terms: goods arrive later and at a higher cost – and tie up capital longer before an invoice is even issued. Eventually, these costs land on the customers.

The typical reaction in the mid-market is understandable – but risky: blanket cost-cutting. Cutting travel budgets, freezing investments, "10 percent across the board." The problem, however, is that those who proceed this way often cut where value is created. And let things slide where value is being lost. This is precisely why many cost-reduction programs fail and do not develop a lasting impact – the effects appear, but they do not last.

Cost management without strategic alignment is flying blind. Strategy execution without cost control remains a wish. Both belong together.

So what is the alternative? Cost management must become an elementary part of the management system.

1) Create clarity before making decisions.

Without transparency regarding contribution margins and cost drivers, you are making decisions in the fog. Executive boards and management need a picture that can be explained: Which products and customers are contributing? Which ones are eating up margins despite generating revenue? Take the example of a family-owned mechanical engineering company: a look at the contribution margins shows that special variants are indeed "sold," but they burn money in production and service. A consistent approach would be: reduce variants, define minimum quantities, and tighten terms to stabilize revenue and increase the contribution margin.

2) Levers for managing value creation.

The focus is on portfolio, product, process, resources, working capital, and cost awareness. This creates an organizational framework that accelerates decision-making. Example from the mid-market: A food manufacturer cleans up its product range, discontinues loss-making segments, and introduces minimum sales per item. At the same time, purchasing, sales, and administrative cost structures are adjusted. The result is measurable after 18 months – and is secured through fixed reviews.

3) Early warning and routines instead of frantic activity.

Cost management works as long as there is freedom of action. This means transparency ensures a rolling view of earnings and liquidity, clear responsibilities, and a short cadence. Example: A wholesaler manages three key figures weekly – inventory range, days sales outstanding, and payment terms. Through consistent working capital management alone, liquidity is freed up without having to touch the strategy.

Conclusion: Costs do not just rise. They shift power dynamics. Those who react too late give up control – to markets, suppliers, and chance. Those who create clarity early and manage along the value chain retain control and can implement their strategy.

THE MAK'ED TEAM links cost management to strategy, not to activism: We create transparency regarding contribution margins, complexity, and working capital, use this to set up an action plan, and anchor the management cadence with key figures, accountability, and timeframes so that it continues to run within the company. Result: more speed, more clarity, and a resilient margin.

More on crisis management and liquidity management.