Cost-cutting strategies are vital for businesses facing financial pressure, especially when investments become overwhelming. In times of economic uncertainty, such as widespread closures and social distancing mandates, finding ways to reduce expenses is crucial.
Whether grappling with immediate financial constraints or long-term cash flow challenges, this article provides essential insights on how to implement cost-cutting measures effectively, ensuring your business remains viable in tough situations.
In some cases, a few minor shifts can help you save big on your monthly expenses. In other instances, more severe cost cutting measures may be necessary. Luckily, there are cost cutting options big and small that are available to businesses of all types and sizes.
No business wants to slash their expenses to the bare minimum, but when you absolutely must save money in your business, see our list of cost cutting ideas to stop the bleeding, ease cash flow and improve profits.
Our Methodology: How We Identified the Best Cost-Cutting Ideas for Your Business
To assist small business owners in identifying effective ways to reduce expenses and enhance profitability, we use a specific set of criteria. These criteria focus on the practicality, efficiency, and potential impact of various cost-cutting measures. Each criterion is rated on a scale from 1 to 5, where 1 indicates the least importance and 5 the highest importance in our review process:
- Impact on Operational Efficiency
- Importance: 5
- We assess whether the cost-cutting idea will improve or maintain operational efficiency. It’s crucial that reductions in expenses do not negatively impact the business’s core operations.
- Sustainability and Long-term Viability
- Importance: 5
- The idea should provide sustainable savings over the long term, rather than just offering short-term gains.
- Effect on Product/Service Quality
- Importance: 5
- It’s vital that cost-cutting measures do not compromise the quality of the products or services offered to customers.
- Employee Morale and Productivity
- Importance: 4
- The impact of cost reduction on employee morale and productivity is considered, as motivated employees are key to a business’s success.
- Scalability and Adaptability
- Importance: 3
- The ability to scale and adapt these cost-cutting strategies as the business grows is important for ongoing financial health.
- Ease of Implementation
- Importance: 4
- We evaluate how easy or challenging it is to implement the cost-cutting measure, including the time and resources required.
- Risk and Compliance
- Importance: 4
- The cost-cutting idea should not increase the business’s risk exposure or lead to non-compliance with legal and regulatory standards.
- Customer Perception and Relations
- Importance: 4
- We consider how cost-cutting measures might be perceived by customers and their potential impact on customer satisfaction and loyalty.
- Innovation and Technology Utilization
- Importance: 3
- Incorporating innovative solutions or technology that can reduce costs without affecting business quality is a valuable approach.
- Environmental Impact
- Importance: 3
- Eco-friendly cost-cutting measures can also lead to savings and align with social responsibility goals.
By applying these criteria, we aim to guide small businesses toward cost-cutting strategies that are not only effective in reducing expenses but also supportive of their overall business goals and values.
Small Business Deals
Best Tips for Cutting Costs
If you need to save money now and make your company more profitable going forward, here are 31 tips and ideas for cutting costs in a small business.
If you’re a solopreneur or work with a very small team in an office, cutting that lease payment altogether may be worth considering. If you need to collaborate in person, this may not be feasible.
However, consider whether or not you can make do with virtual communication or sporadic meetings at a local coworking space. This is definitely one great cost cutting measure for your company, and it may even positively impact employee morale.
Constantly printing hard copies of documents isn’t an efficient use of money or resources for your company. If you can, go completely paperless — or at least come up with a system to help team members understand when it’s necessary to print so you can cut down on paper waste.
Going paperless is also one way you can make your company more sustainable. In addition to reducing clutter and storage needs, this transition can enhance data security and accessibility, as digital documents are easier to secure and retrieve.
To facilitate this change, consider investing in digital document management systems and training your staff on the benefits and best practices of a paperless environment.
Opt for Free Cloud Tools
There are tons of paid tech tools available to help businesses run more efficiently. But there are also tons of free options, like Google Drive for storing files and collaborating you can use as a cost-cutting measure.
Switching one or two of these services could help your bottom line significantly. Free cloud tools often come with a variety of features that cater to different business needs, such as file sharing, real-time collaboration, and automatic backup.
This not only saves money but also fosters a more integrated and flexible working environment. Before transitioning, evaluate the security features and storage capacity of these tools to ensure they meet your business’s needs.
Host Virtual Meetings
Traveling to out of town meetings or even across town to speak with clients can lead to increased transportation costs and wasted time. Consider video meetings on Skype or Zoom instead to further your cost-cutting plans.
Additionally, the ability to meet with potential clients or service providers in other locations can improve your bottom line and operational efficiency. Virtual meetings not only reduce travel expenses but also increase efficiency by allowing for more frequent and flexible interactions. You can even broaden your reach to meet with people outside your geographic area. And cutting this type of transportation can make your company more sustainable.
This digital approach can lead to quicker decision-making and a broader reach, enabling your business to connect with clients and partners globally without the limitations of physical distance.
Cut Landline Phones
A dedicated business phone system can help your company appear more professional and give clients, customers, and partners an easy way to get in touch.
However, there are VoIP and mobile options now. With VoIP, you can still get a dedicated number that you can run through existing phones. And the people that call you won’t know the difference. So this change shouldn’t negatively affect customer perceptions or operational efficiency.
Change Your Thermostat
A lot of your company’s monthly expenses likely go to heating and cooling. Cut your bills by turning the temperature up just a few degrees in the summer and down in the winter. You may also be able to program your thermostat to adjust automatically when all your employees are out of the office for a sustainable change that shouldn’t harm employee morale or operational efficiency.
Improve Your Insulation
Your HVAC equipment will run more than necessary if there are gaps around your exterior or insufficient insulation. Fill in drafty areas and have a contractor make sure your walls and ceiling are insulated properly so your equipment runs at maximum efficiency.
This step not only conserves energy but also reduces long-term wear and tear on your HVAC system. Proper insulation helps maintain a consistent indoor temperature, leading to lower utility bills and a more comfortable working environment.
Consider using eco-friendly insulation materials for an added benefit to the environment. Regularly checking and updating insulation can be a smart investment that pays off in both comfort and cost savings.
Get an HVAC Inspection
It might seem counterproductive to spend on HVAC services when you’re trying to cut costs, but seasonal inspections actually help save money in the long run.
They help you ensure everything is running efficiently in your company so you don’t waste money on energy loss or expensive repairs down the road. A professional HVAC inspection can identify potential issues before they become major problems, ensuring your system operates at peak efficiency.
This preventive measure can extend the lifespan of your HVAC equipment, reducing the likelihood of costly emergency repairs or replacements.
Negotiate Your Rent
Most of your business expenses are likely negotiable. For example, rent is one of the largest, so talk to your landlord to see about a reduced rate. They may be more likely to do so if you agree to pay some upfront, pay early, or sign a prolonged lease.
Once you’ve negotiated lower rent, try these cost-cutting measures in other areas like utilities and vendor agreements.
Demonstrating a good payment history or proposing longer-term commitments can be persuasive arguments during negotiations. This approach can free up cash flow and potentially lead to savings in other operational areas.
Loan repayments may also contribute to your company’s financial hardships. Look into refinancing and restructuring options with your lender to see if you can keep payments manageable. Try to do this directly with creditors first.
However, there are debt restructuring options from outside credit and financial institutions to further cut your cost in running your company. Restructuring may involve extending the loan term, reducing the interest rate, or negotiating a payment holiday.
These options can provide immediate relief to your cash flow and allow more flexibility in managing your finances.
Pay Off Debt
If you’re in dire straits financially, this likely isn’t an option as a cost-cutting measure. However, if you have a bit of cash and just want to make your company more efficient financially, pay off some of your debt to avoid paying high-interest rates going forward.
Prioritize debts with the highest interest rates first, as these are the most costly over time. Even partial repayments can significantly reduce the interest accumulated.
This strategy not only reduces your financial liabilities but also improves your credit rating, making your business more attractive to investors and lenders in the future.
Sign Up for Automatic Payments
Some lenders and vendors offer small discounts for a company that signs up for automatic payments. You can also pay for multiple months upfront, since this means less risk for them. Find out if any of your creditors offer this and then set up automatic withdrawals.
Just make sure the funds will actually be available each month. You want to avoid any late fees associated with those payments which will defeat the purpose of your cost cutting agenda.
Cut Traditional Advertising
If you want to cut marketing costs, start with paid advertising campaigns. Traditional platforms like television and print media tend to be especially costly. You can get a lot of attention using free solutions like content marketing and social media.
And if you do opt to advertise, social and search platforms often let you set your own budget so you can run small campaigns to grow your company.
Create Marketing Partnerships
Another way to keep your marketing cost down is to partner with other companies and split the expenses. If you offer complementary services, like a florist and wedding planner, combine your resources to create a cohesive ad campaign online, in print media, or at local events.
This can ultimately help you increase your reach while also paying less for the ad or initiative.
Word of mouth marketing is a free way to gain new customers and increase profits. But businesses don’t always have control over this aspect of their marketing.
For example, you can provide people incentives for referrals or sharing about your products or services online to bring in new business without spending any actual money.
Outsource Short Term Projects
If you regularly hire employees for your business, you may be able to cut costs by outsourcing or using freelancers instead. Only use this option for non-essential or short term projects. But this gives you another cost cutting measure on things like onboarding, benefits, payroll, and additional office space
Cap Employee Expenses
Cutting the number of your employees should only be done as a last resort, but you may be able to cut discretionary spending that is no longer essential to your operations. For example, you might cut some travel expenses and instead send your employees to virtual conferences.
Or if you offer credit cards to your employees for discretionary spending, implement policies for what those cards can be used for to cut costs on expenses.
Compare Benefits Packages
Some businesses that offer benefits to employees end up spending more than necessary just because they stick with the same plans for too long. Instead, shop around to find the best rates to lower your cost.
Though you want to avoid cutting coverage to the bare minimum, you may be able to find slightly better rates with another provider.
Create a Wellness Program
You may also be able to cut costs in the area of employee healthcare by encouraging healthier lifestyle habits. A wellness program can be enacted fairly quickly and inexpensively and can help you cut costs over time.
These programs can help team members improve their diet, get more exercise, and even quit smoking. With people now more aware than ever about their health, this can be an easy buy-in by your team that positively affects morale.
Even if you need to have an office space, allowing your employees to work from home even a few days per month can lower your electricity bill, fit into a smaller office space, and limit what you spend on supplies.
It also offers other fringe benefits like improving employee morale, since team members will likely appreciate the freedom to create their own schedule.
Unplug Rarely Used Electronics
Your electric bill may be unnecessarily high if you keep extra items plugged in that you don’t need. These may include cell phone and laptop chargers, light fixtures, and presentation equipment.
Even when turned off, they use a trace amount of electricity, so unplug them or use a power strip you can shut off at the end of the day.
Go Through Your Subscriptions
Lots of small business owners subscribe to various services, mailing lists, and publications. You may belong to multiple professional organizations or use a few tech solutions that do essentially the same thing.
If you can condense them and subscribe only to the one or two you really need, you can cut your monthly expenses significantly. Evaluate the benefits and usage of each subscription to identify redundancies.
This assessment might reveal that certain subscriptions are no longer useful or could be replaced by more cost-effective alternatives. Consolidating these services not only streamlines your operations but also significantly reduces overhead costs, freeing up resources for other business areas.
Purchase Used Equipment
Of course, limiting purchases is the best way to control your cost. However, when you need to buy equipment, opt for used over new when possible. Just make sure it’s in good condition so you don’t end up paying for extra repairs and maintenance.
This is a good option when you need items like furniture or display gear. Purchasing used equipment can lead to substantial savings, especially for high-value items like computers, office furniture, or specialized machinery.
Look for reputable sellers or certified pre-owned equipment to ensure quality. Remember to also factor in potential maintenance costs and warranties to ensure the long-term viability of your purchase.
When you need new equipment or services, confer with other business owners to see if they’d be willing to trade instead of accept direct payments. For example, you might be able to offer marketing assistance to companies that provide your business with website help.
Not all companies will accept this type of deal, but try to ask a professional-services firm or vendors before entering into deals. You can also look for companies online that are specifically open to bartering.
Bartering can be a mutually beneficial arrangement, especially when cash flow is tight. It allows you to leverage your expertise or assets in exchange for goods or services that would otherwise impact your budget.
This method can help foster stronger business relationships and open up new networking opportunities.
Shop Around for Vendors
You may simply be able to find better prices by looking at other vendors. If you haven’t shopped around for a while, look for suppliers or service providers in various stages of your supply chain.
You could find better options for inventory, office supplies, or even shipping services. If you can find cost reductions, switch or use that as leverage to negotiate a better deal with current suppliers.
Buy in Bulk — Strategically
Sometimes you can get better deals on supplies or inventory by buying in bulk for cost cutting. However, you should only do this when you’ll actually use all of those items quickly.
Steer clear if you’ll need to find extra storage space for those items or if you’re just buying for a small bulk discount. The extra upfront price isn’t usually worth it in those instances.
Look for Discounts from Your Local Chamber
Your local chamber of commerce may include member discounts to various vendors or service providers, like those that offer web design, marketing, or even shipping and fulfillment services.
Check to see if you can get any of the products or services you already use at a discounted rate while also supporting other businesses in your local business group.
Join a Buying Group
Vendors and suppliers with a robust supply chain can usually offer products at deep discounts when they know they’re providing a high volume of items on a continuous basis. But many small businesses don’t purchase enough products to get a real bulk discount like this.
However, you may be able to get better prices by teaming up with other companies in your area as part of a buying group. See if your local chamber or trade organization knows of anything, or confer with other local businesses to start one.
Get an Energy Audit
If you’re trying to reduce energy costs and make your company more sustainable, your utility company may be able to help. Some offer energy audits for free or at a low cost. They’ll identify or fix problems that lead to energy waste in your office, like old lightbulbs and heating and cooling inefficiencies.
This option can help you lower those monthly bills significantly, while also reducing your carbon footprint and helping your utility provider keep costs down.
Look for Tax Deductions
There’s no sense in paying more taxes than necessary for your small business. There are free tax solutions available to help you find deductions, and working with a local tax professional is often fairly affordable. Finding a few extra deductions may help you save big on that annual or quarterly tax bill.
Move Your Office
For those looking for an extreme cost cutting option, moving to a new location can make a big difference. If you’re in a big city or a downtown area, consider a less in-demand setting. You can also choose a location where you can enjoy more favorable tax rates.
You might also have a bit more space than you need. So, downsizing can help you save on both rent and utilities.
This isn’t possible for all people, but if your business is location-independent, looking into other options or even opting for a coworking space rather than a traditional lease could make a big impact.
Summary of the Best Business Cost Cutting Strategies
Discover efficient ways to reduce expenses with this concise table categorizing key cost-cutting strategies. Each category is assessed based on its overall impact and implementation complexity, to help you in your decision-making.
|Ease of Implementation
|Work remotely, Virtual meetings
|Go paperless, Free cloud tools, VoIP phone systems
|Easy to Moderate
|Adjust thermostat, Improve insulation, Energy audit
|Negotiate rent, Restructure loans, Review subscriptions
|Moderate to Difficult
|Cut traditional advertising, Create partnerships, Encourage referrals
|Outsource projects, Cap employee expenses, Telework
|Purchase used equipment, Barter, Bulk buying, Vendor comparison
|Medium to High
High Impact & Easy Cost Cutting Strategies:
- Work remotely to eliminate office costs.
- Go paperless to reduce printing expenses.
- Use free cloud tools for collaboration and storage.
- Host virtual meetings to save on travel costs.
- Encourage referrals for cost-effective marketing.
Tips for Implementing Cost-Cutting Measures
- Prioritize strategies that offer high impact with minimal disruption.
- Start with easy-to-implement measures to gain quick wins.
- Regularly review expenses to identify new cost-saving opportunities.
- Communicate changes clearly to staff to ensure smooth implementation.
Cutting costs in business can be a tricky road to navigate. But there are plenty of options available that don’t involve cutting staff or limiting your operations to the bare minimum.
Whether you’re looking to save a little on monthly expenses or make a major shift so that your business can be more nimble, the list above includes something for nearly any business. Just make sure to implement cost cuts that work best for your specific situation.
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