4 business cost-cutting tips

Reducing costs is a good strategy in uncertain times — but, cuts should be done strategically. While belt-tightening may be essential, lowering overhead and slimming spending should be done with business goals in mind. Some cuts help a business stay on course, while others can hobble a company by requiring tremendous time and energy to rebuild in the future.

For help in making these important decisions, here's some insight into potential areas for cost cutting and ideas on how to think about each reduction.

Continuing to pay for tools that support the productivity and professionalism of your business is important, since good communication and service are essential to ongoing company success. One opportunity to cut monthly overhead is through comparable, free substitutes for some of the services you pay for now. While you may not want to upend core services you’re happy with, such as payroll or bill payment, question your assumptions about what services need to be fee-based.

You can find free services for many categories by searching online. Companies are frequently changing their offerings, so search in the category of service you need for free options. Some examples of free services to prompt your search include:

• Communication: Free Conference Call, as the name suggests, lets you hold audio and video conferences and record them. UberConference has a similar offering. File sharing services like Box and WeTransfer offer free plans for a limited number of files, and for many companies, the free version is plenty.
• Collaboration: LibreOffice is an office software suite with word processing and presentation capabilities. Trello is project management software that lets a team share and organize project work.
• Business planning: The advice of a good attorney is invaluable, but you might benefit from reviewing and partially crafting some business documents yourself. Eversign features legal documents that you can download and edit for free. It also has an e-signature feature. Consult with your legal counsel about any legal document you create and use.
• Marketing: Email marketing companies like Mailchimp, Sender, and others have free options that let you send a limited number of emails and take other marketing initiatives.

Ideally, try new services for a short time before jumping to a new vendor and unfurling relationships with services you currently use.

While letting people go is a tough decision to make, it’s sometimes the right one. Reducing the number of overall workers you have may be the only way to save other jobs in the company, or your business overall. Check with your financial or legal advisor before making any staff changes, though. If you received Paycheck Protection Program (PPP) funds, a reduction in headcount or in salaries and wages might negatively impact your chances of gaining loan forgiveness. See our PPP loan forgiveness checklist for more details.

If layoffs are unavoidable, and your advisors agree, carefully consider where reductions make the most long-term sense. It might be tempting to let go of the last people hired, but if those people bring important skills your company needs to evolve and thrive in this new normal — digital skills, customer service expertise, or supply chain management, for example — you may need to make the very tough choice of releasing people who have been with you for a longer time.

Another important consideration is the impact of your staff changes to your team overall. While you’re feeling financial pressure now, think through the implications of letting a key leader go if that move might result in other important staff leaving your company. Always consult with your attorney before making any staffing modifications. If you truly believe that your staff reductions only need to be part-time, consider offering reduced hours, job-sharing, and other options to team members.

Knowing what benefits matter most to your team lets you determine where you can make cuts without imperiling the coverage your team relies on. This approach to one of your largest expenses can enable you to control costs and avoid drastic changes that might cause employees to leave your business. A short online survey can help you determine, for instance, what features of a health insurance plan matter most, and what other support your employees see as a priority. You might be surprised at what you learn.

With this information in hand, you may be able to change your plan or substitute low- or no-cost benefits such as flexible work schedules for benefits that currently cost money. If you plan to survey your staff, consider using a tool such as SurveyMonkey or QuestionPro to administer the questions.

During this pandemic, there’s more flexibility than usual for rescheduling payments and even negotiating fees. While you want to avoid deferring too many payments that will result in a large financial burden down the road, consider creating some payment flexibility and better terms where it makes sense.

Speak with your financial advisor or CPA to discuss cash flow planning and tax implications of any planned changes. Some potential areas for negotiation include:

• Utilities: Contact utility companies to determine if you can defer payments or establish a payment program that reduces your near-term expenses.
• Equipment: Payments for leased equipment — office furniture, hardware, and vehicles, for example — can possibly be suspended. Or, you may be able to return leased equipment.
• Real estate: Contact your landlord — someone who has a vested interest in your success — to inquire about a lower rent or more time to pay. The supply and demand for rental space depends on your location, but many landlords right now may realize they don’t have a ready replacement if you can’t pay the rent and must leave. Given this, they may be more willing to negotiate rent than in the past.

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