Cost Reduction: Cutbacks Are Unavoidable

Article Presented by:
Copyright © 2010 Thayne Carper


Good cost reduction means you must slash your expenses and costs when possible, provided that this does not affect your product quality or harm your operations.  There are numerous approaches to cutting expenses, and you cost reduction plan must identify where you can save money.

Practical Cost Cutting Measures

By reducing utilities expenses, for example, your company will save money that otherwise will have been spent inefficiently.  Reducing waste programs and office supply expenses are also practical cost reduction ideas, as companies all too often burn considerable funds in these areas without looking at cost-savings alternatives.  Consider cutting insurance costs, inventory levels, or fixed asset amounts too.

Not only must a company owner find ways of reducing costs, he or she must also figure out different ways of doing business with third parties.  It would be wise to research your vendor contracts and uncover whether or not you can get a better deal elsewhere.   Good cost reduction plans will have you monitor your equipment leases to seek out better opportunities for savings.  The list of cost reduction methods can be lengthy, which is why you must spend careful time planning out good strategies.

Look for Other Ways to Save

Reducing daily expenses that are adversely affecting the budget may be enough for your company to obtain the objectives set forth in your cost reduction plan.  However, if these reductions are not enough, then you must further investigate areas you can cut expenses that will have a positive result.

Of course, you must take care in cutting costs in business and always use good judgment.  If you, for example, decide to cut staffing, then you may find there to be significant consequences.  Fewer staff may mean it becomes impossible to maintain delivery schedules.  Layoffs can result in impaired product or service quality, which would obviously be detrimental to your business.

Layoffs are often the easiest expense to cut at first glance, but the far-reaching consequences can prove they are simply not worthwhile, and you would be best reducing your expenses by other means.  Cutting too many expenses can have other drawbacks; for example, if you cut your inventory levels too much, then your company may save some costs, yet may not be able to deliver its products efficiently within your promised or a reasonable amount of time.  This will not endear you to active and potential clients.

The Benefits of Cost Reduction

An efficient cost reduction plan will ensure businesses will not let expenses run rampant even in good times.  While keeping costs reasonable may appear better than reducing your expenses, you must take into account business cycles and that businesses need to be able to quickly respond to a changing marketplace.

Even in good times, you must consider cutting costs, whether it's as simple as cutting lights or something far more extensive such as fewer capital equipment purchases.  Cost reduction involves both simple and extensive cost cutting measures, and your plan should address various ways of eliminating, or at least trimming, unnecessary and burdensome expenses.




About the Author:
Thayne Carper spent 4 years of college competing in student business plan competitions. He's never won a business plan competition and was dropped from his college's entrepreneurial program for lacking potential. Today, he is one of the youngest published experts on the topic of business turnarounds and cost reduction. Visit his website lower supply costs up to 30% for a copy of his report "The Definitive Guide to Doubling Your Profits in less than 6 Months" and learn how you can easily lower supply and service costs up to 30% without hiring a consultant. Learn more: http://www.ThayneCarper.com/