When you need to cut costs in your business, it’s difficult to know where to begin, especially if you have employees who rely on your business’s success. However, there are a few good ways to get started on getting your business finances back on track.
To help you choose the best path, 10 members of Young Entrepreneur Council (YEC) weigh in on the following question:
“When faced with a situation where budget cuts are necessary, where’s the first place you generally look to cut costs, and why?”
Here’s where they recommend you look and what you can do to get started.
1. Eliminate Process Errors
“Inefficient, error-prone processes cost companies tons of money. If errors in a process result in poor service or defects in your products, every time that process is run, you’re losing money because you need to spend money fixing those errors. If your teams understand how to optimize those processes to eliminate errors, the monetary benefits will far outweigh traditional budget-cutting ideas.” ~ Karlo Tanjuakio, Kure
2. Negotiate With Suppliers
“One way to cut costs without negatively affecting your business is to negotiate with your suppliers. Many of the companies you work with will probably prefer to negotiate a lower rate for you than risk losing your business over a rival offer.” ~ Bryce Welker, The CPA Exam Guy
3. Phase Out Redundant Technology
“We first try to look for redundant costs in technology and services. Do you really need a service or a cool tech? If that is not enough costs, then often you can renegotiate some more pricey services with vendors.” ~ Peter Boyd, PaperStreet Web Design
4. Rethink Marketing Strategies
“Pare back marketing without affecting its overall results. Likely there are plenty of areas you can reduce or cut out and replace with a heavier social media presence, which is largely a free marketing strategy. This budget line is typically where you can identify areas of overspending to pare back without affecting the ability to achieve your goals.” ~ Andrew Schrage, Money Crashers Personal Finance
5. Slash Paid Advertising Costs
“If budget cuts were necessary, I would cut down on our paid advertising budget and go for cheaper alternatives. For example, we can create referral programs to get recommendations. We can create rigorous social media marketing campaigns and encourage all our employees to participate in them to boost visibility. A proper email marketing strategy can also help create some inexpensive promotions.” ~ Thomas Griffin, OptinMonster
6. Compare Short- and Long-Term Goals
“When cutting costs, we do it by looking at the long-term goals of an expenditure. For example, when we got started, the bins we wanted to use for our stock were very expensive, but the alternatives would have been less efficient in the fulfillment process, so we decided to spend the money on them anyway, and bought plastic folding tables and chairs for staff instead of getting fancier furniture.” ~ Vanessa Nornberg, Metal Mafia
7. Look at Overhead Spending
“We will audit (quarterly) all of the expenses across the organization to see where we can cut our overhead and reduce wasteful spending. Oftentimes, we sign up for technology tools that we don’t use that cost tens of thousands of dollars per year, so those are the first items that get cut.” ~ Kristin Kimberly Marquet, Marquet Media, LLC
8. Cut Subscriptions
“You sign up for so many programs you think you will use. When you are able to check the bank statements, you will see programs you haven’t used in months. Cut those off first and then take a deeper dive into your current platforms and research if you are currently on the most cost-effective plan for your company or not.” ~ Mary Harcourt, CosmoGlo
9. Reduce Networking and Event Memberships
“If you have multiple memberships in networking groups or are planning to attend an event, then consider cutting your budget in these areas. It’s important to keep marketing in general, and you can opt for direct means to grow your customer base, like cold emails and ads. However, you can put a hold on expensive networking tasks, especially when they can run thousands of dollars.” ~ Syed Balkhi, WPBeginner
10. Utilize AI
“If you want to cut your costs, you should consider adding AI to your business model. We use AI for some customer support functions and as a way to track data and security on our site. You may have to pay a little more upfront, but this tech will pay for itself in a few short months. Before long, you’ll start to save money from this one seemingly small change.” ~ John Turner, SeedProd LLC
