Business Cost Reduction Strategies
When there's a slump in the economy, businesses become highly concerned with cost reduction and seek the fastest way to cut costs. More astute businesses review costs on an ongoing basis regardless of the economy, focusing on key saving opportunities.
Other People Are Reading
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Program
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The website I Proceed recommends developing a comprehensive cost reduction program. Check industry statistics to understand what average costs are for different areas of potential savings so you can get guidance on some possible areas of savings. Educate employees on the need for continual cost awareness and share with them the benefits of their participation including, but not limited to, keeping the company profitable and healthy. Consider rewarding employees for cost saving suggestions that are implemented. Before implementing any cost reduction idea, if an investment is required, first conduct a return on investment analysis to determine if the required investment is worthwhile.
Energy
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The Pennsylvania Public Utllity Commission recommends that you turn down your themostats in the winter and turn them up in the summer. Consider having an energy audit performed because these audits identify key cost saving areas -- for example, walls and doors where there is significant energy loss because of poor insulation. New Hampshire's Stay Warm program recommends that you install programmable thermostats, which can save you 20 percent on your heating on cooling bill. For lighting, consider using lower wattage bulbs and turning lights off when not in use. Consider replacing incandescent lights with flourescent lights, since they consume less energy. Investigate the use of proximity sensors that will turn off lights when people are not in a room. Investigate state and national energy efficiency programs that provide rebates and other incentives for energy efficiency.
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Labor
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Closely analyze all components of your labor cost. Look at expenditures by department, including fringe benefits. Evaluate the necessity for all of the jobs in each department. Consider transferring employees to departments where they can make a more tangible contribution. Consider letting poor performers go. According the the website Small Business Chron, if sales are sluggish, consider switching some full time workers to part time. If drastic measures are temporally needed, reduce salaries across the board by a specified percent.
Other Ideas
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Review supply and raw material costs. Look at individual items purchased and determine if they can be totally eliminated or if another item can replace them for lower cost. Once a year, get a bid from other suppliers on the items you are regularly purchasing. For telecommunications services, consider a VoIP (voice over Internet protocol) service. Provided you have an Internet connection, this type of service is traditionally low cost compared to regular phone company services.
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