How to Cut Costs without Impacting Your Business Performance
Should you consider reducing the number of staff when cutting costs? Cutting business costs can be done more efficiently. Read on.
Starting a business is often a feat that most entrepreneurs consider as both their biggest hurdle and achievement in life. However, owners often face the challenge of actually maintaining the business. It is a given that entrepreneurs will encounter many different roadblocks, including hiring the right people, developing a brand, and attracting a customer base. Winning against these challenges is what sets apart successful companies from unprofitable ones.
How do you ensure that your company isn’t among that will go under after a few years?
The Cost-Cutting Reflex
Costs will always be a part of running a business. If you have your finances figured out, then it should be the least of your worries. With the current economic uncertainty, however, it may be a given for organizations to consider making significant cuts to their spending. This is particularly true now that the economy is experiencing a downturn because of COVID-19. For some, the most plausible solution would be to lay off their workers. A survey done among corporate leaders revealed that many are planning to carry out financial decisions due to the pandemic. However, this should not be the case.
This cost-cutting reflex, for the most part, is pretty understandable. Entrepreneurs have to make tough decisions to ensure that their business will remain functional amid the ongoing health crisis. Many fail to see that companies who can weather this storm with their team intact have much to gain when everything is over. How? Through their employees. Often, companies can suffer dire consequences when they cut the number of staff they have. They can lose top talent and find it harder to get back on their feet.
So before even announcing layoffs, take a look at what measures your company can do to cut operational costs.
Tips for Cutting Business Costs Efficiently
1. Slash Working Hours
If your business is not doing well now because of reduced orders, consider slashing your staff’s working hours. Choosing to reduce hours rather than the number of people working for you can do wonders. Cutting back the working hours to at least one or two days can already mean significant savings for your organization. The great thing about this strategy is that you get to keep the best employees in the fold while boosting their morale.
One study revealed that giving employees reduced working hours can do a lot to increase their productivity. Based on an 8-week trial done by a New Zealand-based company, employees given an extra day off per week were at least 20% more productive and satisfied. For an organization that relies heavily on productivity and reduced cost, this is something worth looking into.
Note: Be mindful of your team. They depend on you. It’s not advisable to reduce everyone, to say, part-time when they are used to FT workloads. An hour or two a week less per employee for a larger team can add up in terms of business costs. Having employees leave early on a Friday will not be bad for business.
2. Work Towards Staff Efficiency
Another strategy that can effectively reduce unnecessary spending without the need to lay off workers is roster profitability. This means having the right people working at suitable hours, allowing the optimal use of resources. Organizations can look at it as a cost per sale based on the labor cost.
Say you have an ecommerce store and often have roaring sales on weekends, but you only have one employee handling all the sales during that time frame. You’ve also noticed that two people are working on a Monday when the rush has died down. You are not maximizing your staff’s efficiency in a way that would bring revenues to your store. Consider making changes to your employees’ schedules that will allow them to bring even more value.
3. Outsource Your HR Department
For small businesses, maintaining an in-house human resources (HR) department can be challenging. Companies will spend more money managing departments outside of their core operations while remaining clueless about what HR does. Outsourcing your HR to a company that specializes in bespoke staffing can help you lower your costs and free up your time. Doing so will allow you to focus on growing the business. HR tasks like payroll, hours tracking, employee benefits, leaves, and key performance indicators (KPIs) can eat so much time, which can be best spent on more productive tasks.
Offshore outsourcing companies are experienced enough to know the woes that affect small businesses. They understand what needs to be done to ensure that their clients benefit from their strategies.
Here at MultiplyMii, small business owners can sit down with a relationship manager to assess what their company needs to save costs on their HR requirements. Ultimately, companies can scale their business without the need to spend thousands of dollars. Check out our pricing calculator to see how much savings you can get by outsourcing your staffing versus having an in-house department or hiring a freelancer.
4. Cut Supply Costs
Take a good look at your cash flow. You will see supply costs get a big chunk of your budget. If you haven’t yet, now is the right time to talk to your suppliers. Negotiate rates so you can get a better deal. If they don’t budge, don’t hesitate to look around. You should take your time to test other suppliers too.
But, you should be careful when considering this option.
If you have a long-standing supplier, you also have to look at the factors that strengthened your relationship. This includes their reliability when it comes to your deliverables. Factor these in when deciding to shift. If they can’t provide a discount, maybe you can negotiate on better payment terms like reducing the usual 20% downpayment to 15% or less.
5. Examine Operational Expenses
Taking a careful look at your expenses should be part of your overall strategy, not just during tough times. It would be a good practice to have at least an annual budget assessment. This practice will help you see the recurring costs and which of these can be further trimmed down. One example is looking at advertising costs. Did the past year’s marketing campaigns bring good results? If not, it might be time to look at other available strategies.
As much as possible, business owners should remove unnecessary expenses, no matter how little they can be. Often, it is these miscellaneous spending that can have a significant impact on your organization’s costs. Here are some useful tips to help you double down your operational expenses:
Integrate Parallel Activities
If you have several departments, it is time to assess their activities and see if you have teams/tasks that you can integrate. For example, your teams may be ordering similar supplies in small quantities solely for their department. Why not order them in bulk instead and get a wholesale price? The same is true if your organization is paying for software use. See if it would be more cost-effective to have one system used in your whole organization.
Veer Away from Low-Value Meetings
Do you know why the meme “This meeting could have been an email” became so popular? Most organizations spend so much time on these low-value meetings that only put constraints on productivity. Evaluate all scheduled meetings and see which ones can be consolidated or entirely removed from your calendar. Business owners must understand that their most valuable employees are best maximized by having them do actual work during productive hours rather than spending all their time on meetings.
Cutting your business costs is a daunting task, but it is very manageable. If you stick with it and find strategies that work, you can soon reach your financial goals. Talk to us and learn how our offshore outsourcing strategies can help you in cutting your business costs.
