How to Cut Business Costs (Without Cutting Staff)

By Conor McMahon - Nov. 10, 2022
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When your business needs to cut costs, the first thought may go to cutting staff. After all, they are an expensive resource for the company.

However, cutting staff should not be your first option. In fact, it should be your final option.

While cutting staff saves money in the short term, it will lead to more issues in the long run.

There are better ways to save money that need to be considered.

Key Takeaways:

  • Ways to cut costs without cutting staff include tracking expenses, embracing technological solutions, reevaluating contracts, and saving on office expenses.

  • Technology can help you go paperless and remote, which saves on material and location expenses.

  • If you are going to reduce wages, as a leader you should volunteer to reduce your own salary first.

  • Cutting other costs before cutting staff is better because cutting staff results in long-term expenses.

How to Cut Business Costs

How To Cut Costs Without Cutting Staff

  1. Track expenses. Before you cut staff, before you make any changes, you need to understand your expenses. Create a detailed analysis that accurately lists your expenses. You want this broken down as much as possible to see the source of your expenses. The more detailed your report is, the better you are able to cut costs in many little ways. This helps avoid the unilateral extreme of laying employees off.

  2. Embrace technology. Use technology to your advantage to streamline your work and cut expenses. Ways that technology can help reduce costs include:

    • Going paperless.

    • Going remote.

    • Using software to efficiently manage scheduling, training, project management, and communication.

    • Automating or managing processes that normally require a third party vendor.

    • Accounting software to track expenses.

    Although there may be the initial start-up cost, investing in technological solutions to save money will help your business be more efficient without cutting staff.

  3. Re-evaluate contracts. As a business you will work with third party vendors, contractors, suppliers, insurance companies, and all other sorts of organizations. Look into renegotiating the contracts you have with these people or else look for competitors who may provide the same services for a lower price.

  4. Save on office expenses. If you are still required to have a physical office space, do your best to make it as affordable as possible. Have as much as your staff work remotely so that you can work in a smaller space. Also look to saving on energy expenses by making your office as efficient as possible. Invest in electricity-saving lighting, as well as windows, flooring, and other building accessories that help save on heat or air conditioning.

  5. Reduce travel. If your business requires travel, do your best to reduce it to only necessary trips. Also look for ways to travel efficiently. For example, book business trips that in easy accessible hubs, or else book trips that are near each other to reduce costs.

  6. Eliminate costly perks. Although everyone loves a free lunch, if you need to save money, these are the items that should be first to go. You don’t have to make your workplace void of any fun or recreation, but you do need to be smart about how you provide perks.

  7. Time efficiency. Time is money, and wasted time is wasted money. To make your business as efficient as possible, considering ways to be more efficient with your time. How you schedule your employees, meetings, and other items might need to be re-evaluated.

  8. Volunteer to reduce wages. As the head of the business, you should lead by example and take a pay cut before you ask anyone else to do the same. Then, before you implement mandatory pay cuts, first ask for volunteers. Make it clear to your staff what’s at stake. If possible, provide guarantees for raises once you reach a certain amount of revenue or profit.

  9. Reduce hours. As a final measure before having to lay people off, reduce hours. By reducing hours you save money while still giving people some financial and professional security. It is not pretty, but it is better than the alternative.

Why Cut Other Costs Before Cutting Staff?

You should cut other business costs before cutting staff because it is more beneficial in the long run.

Cutting staff is the easy solution. It immediately saves you a significant amount of money. However you need to consider the costs that come with cutting staff. For example:

  • Hiring and training replacements. Unless you are cutting staff to get rid of positions that are no longer needed, at some point you will need to hire and train a replacement. This is costly process that results in lost production as you have to find, train, and bring up to speed a new employee.

  • Missing crucial knowledge. Similar to why hiring and training a replacement is expensive, when you cut a employee you lose their knowledge of their position. As you try to function without their presence, you find it harder to get tasks done as easily, leading to more time and money spent.

  • Responsibilities inefficiently delegated. If you cut staff but still need their responsibilities dealt with, then you might try to have other employees pick up their work. While this can be a short term solution, in the long run it prevents your employees form effectively engaging in their own work, resulting in lower productivity.

  • Low morale, low productivity. Whether you are wasting time hiring and training replacements, or else expecting other employees to pick up the slack, when you start to cut employees, you lower morale. People become fearful about their future. Employees get frustrated about the extra work with no compensation. This low morale will lead to lower productivity, losing you money.

Unfortunately, there are times when it is necessary to cut staff.

You may have tried all other options and you still need to cut costs. Or, it may be that some positions are redundant or no longer needed.

Still, cutting staff is an extreme measure that should be carefully considered before being implemented. It’s not just the humane thing to do, it is the financially sensible thing to do.

Conor McMahon is a writer for Zippia, with previous experience in the nonprofit, customer service, and technical support industries. He has a degree in Music Industry from Northeastern University and in his free time he plays guitar with his friends. Conor enjoys creative writing between his work doing professional content creation and technical documentation.

Author

Conor McMahon

Conor McMahon is a writer for Zippia, with previous experience in the nonprofit, customer service, and technical support industries. He has a degree in Music Industry from Northeastern University and in his free time he plays guitar with his friends. Conor enjoys creative writing between his work doing professional content creation and technical documentation.

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