Whenever your business is struggling or you simply want to increase profits, one of the first steps is to consider cutting costs.
While that sounds like a simple idea, there are some precautions that need to be taken, as well as other considerations.
1. How much can the cuts save? Sometimes, we look at cost cutting measures closely only to find that they aren't real savings. Other times, the cost savings are so massive that we wonder why it took us so long to see them.
2. What problems might this cost cutting create? Every change creates problems and solutions. Look at what types of problems your proposals might cause.
3. How can your cuts affect quality? We've all seen companies that cut costs to the detriment of quality. That's a bad choice. Look closely at how quality will be affected before moving forward.
4. How long will it take to see results from these cuts? The timeline is vital. If it's going to take a very long time, it might not be worth it. There may be ways to shorten the timeline, but make sure that the results will still be profitable at that point.
5. Do you have the expertise to make these cuts now? Not every cut can be done by you or your team. It's sometimes necessary to hire a consultant or a team to come in and make cuts. This is partially because they can see the entire situation better. Also, it will be those outsiders who take the heat if the cuts are uncomfortable.
6. Is it possible that you need to shut down the department, position, or product? If you're trying to cut costs in an area of the business that's losing too much money, it might be worthwhile simply eliminating the location, function, division, position, or product. Sometimes, it's better to cut your losses than continue to struggle trying to save something that's a loser.
Cutting costs is something that nearly every business needs to do from time to time.
Doing it well is the key to making your business stronger.
Take your time. Plan well. Execute judiciously. Keep your team informed about why and how the cuts are being made.
Photo by Tima Miroshnichenko: https://www.pexels.com/photo/a-woman-in-plaid-blazer-using-her-laptop-6693661/