Cost cutting is a good practice during good times and bad times. Cost cutting is a skill you need to be good at.
The key to successful cost cutting is cutting in the right places without the cuts affecting the operation of your business.
Cost cutting is a good business exercise and good business practice. It keeps your business strong and your profits up.
1. Cut Costs in Your Services
Services that you offer in your business are always a source for cost cutting. You don’t have to cut out the service, but you can downgrade the service or switch providers.
Sometimes you have a service that costs you more but doesn’t deliver the value. For example, I had a dedicated web server for my site. It was costing me around $250 per month. Although it was the best service, it was overkill for what I needed at the time.
I looked for a different service that met my needs and it was $49 dollars per month. That’s $201 dollars in savings by getting rid of something I didn’t need.
2. Eliminate Unused Memberships
You may have memberships that you use on a monthly or yearly basis. Ask yourself how these memberships contribute to your business success. Would your business suffer if you cancelled them? If not, then cancel them.
3. Eliminate Subscriptions
You may subscribe to trade magazines. You need to determine how much those magazines are helping you run your business. You also have to determine if you’re really reading them. If you’re not reading them and saying that someday you will, then that’s a sign that you need to cancel those subscriptions.
4. Cost Cutting in Job Areas
I’m not one who believes in job cuts, but when you have to cut some jobs to save the business, then it’s better to cut jobs than to go bankrupt.
So if you have an employee that’s doing a job that isn’t really necessary, then maybe it’s time to consider letting that person go. As hard as that may be, you will have to determine if that’s what you need to do.
One way around eliminating jobs is to try and negotiate a pay cut. Some people would rather take a pay cut then lose their job.
5. Reduce Energy Use.
You can reduce your energy use by turning off lights and equipment that is not in use. Get a thermostat that has a timer that will adjust the temperature during times no one is around and therefore save on energy bills. Turn off computers at night if they are idle.
6. Evaluate Your Advertising Costs.
Advertising can be an expensive part of any business. Done right, it can bring in revenue and keep your business going strong. On the other hand, when you advertise blindly, you could be running up huge costs that are hurting your business every time you run an advertising campaign.
You should test every campaign you have to ensure your advertising is increasing revenues. Eliminate all advertising that is not bringing in any income.
7. Eliminate any Poorly Producing Products/Services
Any product or service that you have that is not contributing to your business should be cut. For example, let’s say you have a computer repair business and you also have accessories and parts.
The parts that you don’t use on a regular basis are costing you money, because typically computer parts deteriorate in value, and having them lying around won’t do your business any good. Plus you have to pay for them, stock them, and keep them in your inventory. On the other hand, if you just order the part with overnight shipping, it may work out better for you.
Another example is: if you have a website design business and then you also offer graphic design and search engine optimization.
If you are not making a lot of money from the mixed services, then you’re better off eliminating them, because:
1. You can focus on the services that make you money;
2. You don’t need to promote those extra services; and
3. You don’t need resources for those businesses.
Even if you do get asked about those services, you could always set up a joint venture deal and have someone else who specializes in that service do the work.
8. Sell Off Assets
You may own assets such as land, an office building or equipment. This is not a bad thing unless you are not using these assets. Assets that are sitting and not increasing in value are another good place to cut costs, because you have to pay taxes on land and on empty office space as well. Also, any unused equipment may need maintaining, etc. So review you assets and sell of anything that you decide is not worth having.
9. Refinance High Interest Loans
Interest can be a huge expense. Saving a few percent on interest will make a difference. Even if you keep your payments the same after refinancing, you’ll be paying off more of the principal rather than just paying interest.
10. Cut Rent or Lease Costs
If you are paying high rent in your area, then it may be time to consider moving. But be aware just that location is very important. If you can find a cheaper location that will not affect your revenues, then it’s time to start looking.
