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? Check out TAB's PULSE Survey on Financing Strategies.