A radical reduction in a single area of business is too high a risk when weighing one’s options with how to cut costs. Therefore, it’s best to approach cost-cutting measures with equal distribution.
The goal of the measures isn’t to gut the company but to reduce costs in incremental amounts by eliminating wasteful activities. Doing so makes a minimal impact on productivity and workplace morale.
This article shares how to cut costs without sacrificing culture and opportunities.
- Slashing Expenses (Not Performance): How to Cut Costs Effectively
- The Tough (But Necessary) Cuts to the Essentials
- Securing Funds: Avoiding the “How to Cut Costs” Discussion
Slashing Expenses (Not Performance): How to Cut Costs Effectively
Do this: Retrieve current business expenses and divide the list into essentials and non-essentials.
Let’s use non-essentials as a starting point with how to cut costs. Then, make our way into the tougher decisions for keeping finances in check.
The Non-Essentials for the Cutting Block
These are the financial “vampires” sucking away profits. They are the type of expenses your business can do without — including:
Print manufacturers have businesses in a bind with their low printer, high supplies costs.
Businesses need physical records for administrative purposes which gives market control to these print manufacturers.
Print supplies cost hundreds of dollars for business-level printer models. A cost-cutting option is to use remanufactured cartridges. Or, by refilling ink and toner cartridges.
These third-party supplies produce similar results at half the costs. Using third-party supplies do not void the warranty, either.
Alternatively, switching from hard to soft copy is a long-term money saver by eliminating most printing costs. Do this by getting customers to enroll in online billing or send/store documents digitally.
Programmable thermostats are one way to combat rising heating and cooling costs. A flexible dress policy can help, too, by allowing employees to dress down or bundle up at appropriate times.
Practicing good energy conservation, by powering down at the end of the day, will contribute to cutting utility costs. Apply similar routines you’d use at home with lowering monthly costs — but in the office.
Telecommuting options can switch employees to independent contractors. These individuals will file 1099’s; it will reduce overhead costs with insurance. You’ll also save by reducing the need for in-house hardware and software.
The employee no longer needs to commute and sets their hours. It’ll improve job satisfaction by reducing stress. This often leads to a productivity boost, too!
Used vs New
Office furniture and hardware, with regular replacement and maintenance, is a recurring expense. The wear from a near 8-hour, constant use damages materials. In fact, damaged office furniture poses employee safety risks which are a lawsuit waiting to happen.
Consider purchasing furniture and hardware through eBay or second-hand stores.
Don’t want used items? Find open box alternatives at Overstock.com or office liquidation centers for steep discounts.
System crashes and accidental deletions will disrupt workflow. For some, an hour of downtime costs nearly $100,000 in lost productivity and sales.
Downtime tends to happen because of user error such as accidental file deletion.
Lock workstations by using virtual desktops which offer environments granting access based on user needs. This will prevent certain (tech-troubled) employees from accidents.
Yorkshire Cloud is one such provider of virtual desktop environments worth considering for this cost-cutting measure. Otherwise, purchase hard drive “ghosting” programs to create similar environments.
The Tough (But Necessary) Cuts to the Essentials
Then, you have tough cost-cutting decisions in the areas of operation your business relies heavily on for productivity. There are options:
Suppliers and Manufacturers
Upticks in supplier costs are normally passed on to the buyer. Sometimes costs rise due to mismanagement, too. There are (almost always) options for sourcing cheaper products if you’re willing to look.
Consider using Alibaba to source from China. Or, use a bit of reverse engineering with a bill of lading to find where competitors get their products. Then, contact the supplier and negotiate a better deal.
It’s tough abandoning a product line because it was your creation. But, there are times when you’ll need to drop support for underperforming offers because they are financial losers.
Keep their business by funneling customers to an alternative solution or refer them to another business.
The bonus: Removing the money sink from underperforming items lets you place more capital toward products doing well. This will increase product advertising and marketing which should improve sales.
Employees catering to troublesome customers limits valuable work time. Troublesome customers often need extra hand holding. This is the time employees could spend nurturing positive relationships without doubling efforts and commitments.
Respectfully decline business from these troublesome customers. Refer them to other businesses. Thank them for their patronage. Then, double efforts with customers showing promise. Select these customers based on performance pulled from sales reports and marketing data.
Businesses rely on third-party service providers for items like accounting and marketing. These essential services are replaceable by expanding employee education and bringing them in-house.
Create a workplace that embraces learning by giving “flex time” for employees to pursue interests outside their workday routine.
Offer online courses to employees in key areas of business you outsource or use professional services. For example, you could use accounting software versus paying CPA’s. Or, send an employee to a marketing conference to learn and bring back strategies.
The location influences expenses via:
- Income tax
- Sales tax
- Property tax
- Excise tax
- Payroll tax
Likewise, the ebb and flow of locals and tourists will shape business viability. It’s simple supply and demand and the reason for “location, location, location!”.
Consider moving the main business operations to a cheaper location while working from a satellite location in the prime area. Else, place an investment into online efforts to expand global reach. Versus a sole reliance on local campaigns.
Securing Funds: Avoiding the “How to Cut Costs” Discussion
Perhaps your business expense report came back without non-essentials. Your business is running lean as-is. Where do you go to pump cashflow if there’s nothing to cut and save finances?
- Lending Tree
Startup funding options are available to all. Business owners should explore them during difficult transitional time with operations.
Cut Costs, Not People
If there’s one thing to learn when exploring how to cut costs it’s that small expenses are easily replaced. Great talent… not so much.
Consider a democratic approach when cutting back and try your best to avoid eliminating essential employee resources. Find ways to improve their work through flexible, lean online services instead.
And remember not to take it too far — to the point your business can no longer provide quality offers. Nor sustain its operations and growth.
Question: What items would you suggest if an owner asked how to cut costs?