As businesses the world over face incredible challenges completely outside of their control, more and more entrepreneurs are casting worried glances over their finances and wondering how to balance the books. If the numbers don’t quite add up, then one of the first actions entrepreneurs will initiate is also one of the most dreaded: cost cutting.
Very few businesses operate with costs that are wildly out of control to the point where it’s possible to make cutbacks without impacting the business at all. For most, cutting costs is going to mean making significant changes to how the business operates, and can result in a number of tough decisions needing to be made. If you’re currently facing this situation yourself, then you will naturally want to ensure that any cost-cutting measures you take are absolutely crucial, with the end result for your balance sheet likely to justify the challenges you will face in getting to that point. So, with that in mind, it’s worth asking which of the most common cost-cutting measures will actually make a difference – and which might be more trouble than they’re worth?
Successful Cost Cutting Options
Of all the cost cutting options available to businesses, one of the most effective is simply looking to pay less for items that are purchased frequently. This type of cost cutting is something that households do when finances tighten, and the same principle applies in the office. Essentially, your procurement mantra needs to be very clear: if it’s something that your company has to buy in order to operate, then your goal is to make sure that you are at least getting the very best deal for every single item.
In terms of achieving this goal, there’s actually two different ways you can look to achieve the “best deal”. The simplest is just to look away from your usual suppliers to see if you can find better prices for the items your business has to purchase regularly, such as office supplies, packaging, and similar items. Even your utilities can be included in the hunt for a best deal; call existing providers and ask if they can reduce your payments, and if so, see if you can leave the contract early in favour of a better deal.
Another option to consider is changing how you buy, with wholesale an excellent choice that can reduce your costs in a second. If you have the storage capacity available, choosing to invest in wholesale ink cartridges, office paper, staff lanyards, and promotional materials will usually be far more cost-efficient than buying singular or standalone items. While there is a significant upfront investment with wholesale, over the course of a quarter, it is one that is absolutely worth making.
A particular bonus – and a significant reason we consider this option to be the ultimate “good” way to cut costs – is the impact on your business. Whether you look for better deals or switch to wholesale purchasing, the effect on your business will be close to zero. Same business, same operations, but lower outgoings: perfect.
Questionable Cost Cutting
Marketing is an aspect of business that often finds itself on the chopping block when it comes to cutting costs; marketing costs can be high, but the results from that investment can take time to bear fruit – time that isn’t available when finances are tight. As a result, reducing marketing spend in favour of focusing on existing customers can seem like a natural choice.
To an extent, cutting marketing costs can help a business; that’s why we’ve labelled it as “questionable” rather than outright damaging. However, the extent to which you cut is a matter of concern. If you are to reduce marketing costs to almost zero in an effort to save funds, then the impact on your monthly outgoings will be immediate, which will undoubtedly be a relief. However, the moment you cut marketing is the moment you reduce the potential to draw new customers to your company – so further down the line, those short-term savings can really begin to harm your business’ revenue, as the steady supply of new customers starts to dwindle.
When facing tough economic challenges, businesses have to strike a balance between ensuring their marketing costs are reasonable without cutting off the one aspect of their business that is more likely than any other to actually increase turnover and, ultimately, profit. Marketing, and the customers it can bring, are vital. Yes, the quick reduction will be reassuring, but if you’re going to make swingeing cuts, they need to be intended to be very short term: a month or two at the absolute most. Otherwise, long-term ramifications can be very serious indeed. If you can, keep the cuts reasonable and proportional, focusing most of your budget on the marketing areas that work best for you and have proven to be capable of generating results, and cutting back in less-successful areas for the time being.
Damaging Cost Cutting
By far the most damaging way to cut costs is to cut back on your customer service provision. Depending on the size of your business, a customer service cutback could mean anything from reducing the time you spend on social media talking to customers or relieving specialist customer service staff of their duty – and while different in terms of scale, both of these are hugely problematic.
At times such as these, customer retention is even more critical than it usually is. Given that good customer service is a key contributor to this retention, few businesses can afford to make reductions in this area. Unless you have absolutely no other choice, try to continue your commitment to great customer service wherever possible.
No business owner wants to reduce their outgoings, especially if doing so will have an impact on the way their business operates – but sometimes, cost cutting is an unwelcome necessity. If you are going to have to reduce expenses in your own company, then keep the above advice in mind, so that any measures you do implement are at least capable of achieving the intended goal for your company.