As your business evolved, it gathered a lot of surplus assets, items, and operating expenses.
One method to get your business in shape is to cut out the surplus, without touching the core of the business. The best way to start planning for your cost cutting strategy is to look at the big picture.
To start, you should have your financial records, or at least your expense records, on hand. Study your expenses, and look for high and unnecessary ones.
There are numerous areas and ways you can cut costs in your business. I will give you a few ideas in some areas where you might want to look.
Assets not used to their potential should be sold! The funds received for their value should be put to better use. Expand your business in areas where extra funding can increase revenues. Why keep dead assets lying around? Get rid of them! Use the money, tied up in those assets, to work in areas that can strengthen your business.
Subscriptions and Memberships:
Do you have excessive subscriptions and memberships in your business? You should reevaluate and get rid of the ones that are not absolutely necessary. You might have subscriptions to magazines that provide you with important news relevant to your business. Subscriptions that don't benefit you are just a waste of money. Cancel them.
Your company may have memberships for things, such as health clubs. Is this really necessary? You know your business, and you know what should stay and what should go. When you start cutting, don't stop. Cut hard!
Luxuries vs. Necessities:
Luxuries in a business are usually found with upper management, and the necessities are found with the lower end employee class. Cut the luxuries, not the necessities. When you are running a fairly large business with a number of employees and when you are planning your cost cutting strategies, you may think of starting at the bottom. For example:
The employees may have some benefits or privileges. You think, I can start from there, and save so much annually. This is the wrong place to start. You should start cutting at the top. When your employees see you are cutting cost starting from the top, they won't make as big a fuss about it when the cost cutting gets to them.
It is also a good idea to let the employees know what's going on. Let them know how this cost cutting will strengthen the business and make their jobs more secure. This will help prevent the circulation of rumors and the start of a panic within your business.
An excessive number of employees in a business can be crippling, not only because of the wages involved, but because of the benefits, pensions and other expenses that follow.
You may feel you are providing a job for these people, and you don't want them to be unemployed. However, if you keep excessive employees on your workforce, you jeopardize the business and everyone's job. You have to take this into consideration and make the right decisions. I am not saying fire as many people as you can, but I am saying: eliminate the waste.
You may be able to consolidate jobs. This will eliminate extra employees and keep the current employees busy. Make sure you only cut the jobs that are unnecessary. Cutting out too many or the wrong jobs will turn into a workforce nightmare.
You have 25 employees; you have found ways to consolidate and eliminate 7 jobs. This translates into 7 weekly unnecessary paychecks. It is true you have eliminated 7 jobs, but you have stabilized 18 others. If you didn't terminate the 7, all 25 would be in jeopardy.
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How to Eliminate Chaos in Your Business