Business Advice Blog

Tactics for Strategic Cost-Cutting in Your Business

Strategic Cost-Cutting

For many businesses, cost-cutting becomes necessary in times of sales slumps and reduced revenue. But strategic cost-cutting is a different matter altogether. This process, as Forbes contributor Rodger Howell notes, “helps ensure an organization is ready for growth” with a focus on “aspects of the business that are controllable while freeing up resources” that can lead to future growth.

Become a better negotiator. Business is based on transactions, specifically those that in some way benefit both parties, the seller and buyer. As CEO or business owner, you’re often well-positioned to negotiate on behalf of your company. Are you making sure to keep your negotiating skills at their highest level?

A skilled negotiator walks into a meeting with a vendor, for example, having “already explored all of the possible outcomes and how each aligns with [their] overall strategic plan.” Armed with the knowledge of how much vendors charge for the same types of products, you can cut costs by aggregating purchases to achieve savings in volume.

Identify cost-saving measures linked to multiple business locations. If your company operates offices in several locations, try performing a “geographic income statement” that pinpoints areas where budget cuts can be made without sacrificing product or service quality. If one area regularly outperforms another, it might be time to shut down the underperformer and focus resources where they gain the highest ROI.

Explore flexible scheduling for employees. A great deal of money is spent on supporting employees who work traditional hours in a traditional workplace setting. If your company hasn’t already explored the potential benefits of flex-time and telecommuting, now’s a good time to start. When employees work remotely, you can reduce expenditures related to utilities and even negotiate a reduction in your building lease or rent payments. These savings can make a big difference spread over months or years.

Cut travel-related expenses. Business travel may be necessary, but it doesn’t have to involve needless expenses. CNBC offers these budget-slashing travel tips:

  • Book your flights as far in advance as possible.
  • Leverage all the hotel chain and airline rewards programs you can.
  • Forego the convenience of flying into a major airport hub if the costs involved in flying into smaller regional airports are significantly less.
  • Encourage virtual meetings through Skype, GoTo Meeting, Web Ex or other digital resources.

Again, minor savings here and there can add up to big reductions over time.

Consider a hiring freeze. It’s never a good idea to stop hiring new talent and it’s also desirable to avoid any significant layoffs. Instead, if personnel costs become too burdensome, consider a hiring freeze for all non-essential positions. Doing so enables you to “consolidate the employees you have to complete the work that is essential for serving [your] customers.” And you can devote more time and resources to recruiting candidates for your more difficult-to-fill positions.

Adopt a smarter approach to operations. For manufacturing businesses, there’s always savings to be found in automating or combining repetitive processes. This same principle can be applied to many other types of businesses seeking ways to increase productivity without spending a great deal more on equipment or personnel.

Look into acquiring (or leasing) new technology that optimizes routine operations. Of course, there will be initial acquisition costs, but over time, you’ll likely see the kind of cost reductions you’re looking for. To stay competitive in the marketplace, “there’s really no other option than enthusiastically embracing the opportunities new technology provides.”

Embracing a strategic approach to cost-reductions can help keep your business lean, agile and prepared for challenges in the future.

Want to learn more about strategic cost-cutting? Find out if a TAB Board is right for you!

 

5 Growth Strategies for Businesses with Limited Capital

Cash Strapped, Limited Capital

Even if your business lacks unlimited capital, this doesn’t mean you can’t plan for ongoing or future growth. What matters most is doing all that you can with the resources you have.

Being cash-strapped “does not need to be the death nail of your business,” notes small business expert Melinda Emerson. “Hundreds of millions of people throughout history have started and maintained their own small businesses without access to an unending supply of cash.”

Here are five suggestions on how best to plan for growth when you’re working with limited capital:

1. Be realistic about your company’s growth potential. Prior to making the leap into scaling up, says Jim Morris, President and Owner of The Alternative Board Tennessee Valley, “the business owner should do a cash flow and working capital analysis to determine if the business can fund itself adequately as it grows.” Financial preparation, as well as a working knowledge of your company’s current and future needs, he adds, “must be evaluated to avoid cash problems and unpleasant surprises that can come with growth.”

2. Develop a focused marketing plan. To get where you want to be, your planning should include a focused marketing strategy. With your limited capital resources in mind, establish a marketing framework that combines an in-depth knowledge of your target audience with a comprehensive competitive analysis of the marketplace. This way, you “enter the fray” with a keener grasp of what expansion costs will look like over a set period of time.

3. Maintain a tight approach to hiring. Attempting to grow on a limited budget is tricky enough without going on a hiring spree. How much of your future growth depends on having a full-time staff? Where possible, look to outsource key operational activities to meet your expansion goals, without incurring added expenses related to payroll, healthcare and other legally mandated benefits. A lean workforce can help you shift valuable resources elsewhere.

4. Diversify or add a new offering. There may be ways to refine your existing goods or services to attract a broader array of customers (in addition to your existing customer base). Or you can explore a new offering that broadens the appeal of your company. When you diversify, you “also protect your existing customer base and create multiple income streams that can often fill seasonal lows and, of course, increase sales and profit margins.”

5. Boost your social media marketing activities. One path towards effective growth lies in leveraging the ever-growing power of social media. Numerous TAB Members have successfully harnessed that power to increase sales, including the following:

  • Boosting brand awareness by encouraging satisfied customers to post positive reviews on Yelp and elsewhere
  • Using a Reddit profile to generate new sales leads
  • Posting new content on Facebook, Twitter and elsewhere that highlights your status as an industry thought leader (with links back to the “Learn More” page on your business website)
  • Synchronizing email campaigns with social media advertising for broader impact
  • Finding and attracting customers through unique Twitter hashtags

As long as you avoid the hard sell, social media is a fantastic venue for posting customer testimonials, details about a new product launch, news about special sales promotions, etc., without having to spend vast amounts of money on advertising campaigns.

Small businesses can’t match the resources of a larger competitor, but there are still many ways to plan for and achieve expansion. The key is a wise application of limited capital with the right growth strategy.

Want to learn more about strategic planning and price increases? Find out if a TAB Board is right for you!