Things You Need to Have in Mind When Cutting Your Business Costs

By Albert Konik

Cutting costs is a normal and inevitable thing in the business world, and many entrepreneurs have to do it at some point in their careers. But as you probably suspect, it’s not a piece of cake.

There are many things you need to consider when cutting costs in your company. You need to make sure that your business will run smoothly, and that your quality won’t suffer as a result of cost-cutting.

If you want to ensure that you cut your business costs without sacrificing integirity, there are some things you need to have in mind. What are they? You’ll find the answers below.

The Company’s Efficiency

When you decide to cut your business costs, you want to make sure that your company still runs smoothly. You want to make sure that your product has the same quality and your essential employees are happy and motivated. Cost-cutting should never lead to demoralization. How can you achieve that? With outsourcing. This might seem counter-intuitive, but read on:

Outsourcing is a fantastic way not only to cut your costs but also to increase your business’s efficiency. The vast majority of big companies outsource some aspects of their operations, and there are plenty of reasons for that.

We don’t mean outsourcing your whole team - you need to keep your essential specialist and concentrate on making them happy - making everything around them run smoothly contributes to this goal. Outsourcing menial tasks will make your home office team concentrate on what’s important and free up their time - and without having to hire expensive local labor to perform small operations, you’ll be saving money and office space.

The most common things businesses outsource, is HR, accounting, and customer service. If that’s something you’d like to know more about,  check out sites like ivyanswer.com with their Ivy - Answering Machine, or Concurrent HRO, and learn more about how outsourcing customer service and HR can cut your costs and make your company more efficient.

Companies like this usually hire a team of experts that would be very expensive to upkeep if you were to have them in-house. It’s not a matter of outsourcing overseas but to the specialists.

Customer Base

If you want your company to grow, you need to expand your customer base. And the only way to do that is the effective use of marketing tools. Some experts say that you should spend no expense in marketing and advertising. Well, they’re wrong.

Many companies spend exorbitant amounts of money on advertising and still fail spectacularly. So how can you cut your costs, and also make your marketing much more efficient? With the use of digital marketing.

Explore tools like SEO, Google Ads, or Facebook Ads. They are far cheaper than traditional marketing, and far more effective.

With digital marketing, you’ll be able to get to a far bigger customer base and go directly to your target group. The Internet doesn’t have any demographic or geographic boundaries, which makes it the best marketing tool - in fact, Google has mastered the art of advertising so that you can be sure that every time someone reads your ad, they are reading it because they are the perfect client for the service or product you offer.

Employee Efficiency and Happiness

A happy employee is an efficient employee. Keeping your staff happy and pleased should be one of your top priorities if you want your company to run smoothly. Keep this in mind when cutting business costs. You don’t want to cut motivation - it’s like tossing the baby out with the bathwater, isn’t it?

How can you achieve that while cutting your costs? Well, there are some things you can do. First of all, when deciding on lowering your office space costs, make sure that you don’t go too far.

Every office requires reliable and solid office equipment - depending on what you do, you’ll need computers, high-quality printers, solid coffee machines. All of this can be leased! Not to mention stuff like restaurant equipment, heavy machinery, and niche-specific supplies. You don’t have to spend money buying all of this. Leasing also keeps you up to date - upgrades often come with your lease.

This saves money in the long run and in the short run - with break-down service and replacements, you save a lot of time and money that would be wasted every time something in the office needs maintenance. And everyone experienced something like this at some point in their careers!

Think About Supply and Demand

Supply and demand are the two basic things that drive the economy. If you’re an entrepreneur, you know how they work, so there’s no point in explaining them. But why should you always think about them when cutting your costs?

The answer is simple. Lower your production costs. Just look at the two simple examples. 

Firstly, if the demand for your product is lower than your supply, what’s the point in producing so much? It makes your production financially inefficient. Moreover, when your production exceeds your actual demand, you need to store your goods. 

And keep in mind that storing your products isn’t free. And the more products you leave in magazines, the higher your expenses.

On the other hand, when your demand is growing, you need to produce more. And when you have to produce more, your production costs increase. So how can you lower them?

Outsource your production or move it to the place where the workforce is less expensive. You’ll be able to produce more, and pay less for it. This is probably the most no-brainer of them all, as most companies outsource production. Unless your goal is to make only local and more costly products, there’s no reason why you shouldn’t do it.

Allow More Remote Work

Remote work was a strange subject before COVID. To let people work remotely or not? After a period of working from home at most companies where it’s possible, a lot of employers have come to the conclusion that this is something worth pursuing.

Productivity levels don’t suffer significantly, but the amount of coffee you have to purchase, electricity and office space bills are where you see the difference. We’re not saying that no one should ever come to the office - but allowing more remote work will up your morale, employee happiness (sometimes you just don’t want to change out of your pajamas to write a report), and you can even hire more people and not pay for a bigger office - just work on a rotating schedule.

This is a morale booster and a money saver all in one!

Summary

There are many options for lowering your company’s expenses, some of them are obvious, some not so much. You have a lot of choices - see which one is best for you before you think about laying people off.

Cut your business costs wisely, and your company will only benefit from it.