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With a forecast of rising inflation putting pressure on costs coupled with shrinking sales in certain industries, then many businesses will be paying extra attention to cost cutting opportunities. In this blog I have identified the top 15 generic opportunities for cost savings that can be applied either directly or in a modified state to almost any business.
Cost cutting should be viewed in a positive light
Done correctly, the benefits of a cost cutting exercise can deliver more than just excellent immediate financial returns. It can also be a vehicle for consolidation of management process and shedding of wastage after a long period of growth, when there may not always have been time to prune and shape the expansion for maximum value.
Each industry will have it’s own specific cost areas that are high on the agenda, but there is also a great deal that is shared across business in all industries.
Fundamental rules for cost cutting exercises
The first rule of finding good opportunities is to look in the most likely places. Natural human weaknesses are a dead cert; poor communication, empire building, hanging on to bad routines, loss of direction and purpose, poor decision making, fear of hiring good people, fear of encouraging good people.
The second rule of finding cost cutting opportunities is to avoid the ones that reduce the value proposition to your customers, the ones that harm communication, especially with the customer and the ones that rely on volatile currency rates or political situations and ones that de-motivate key personnel.
Below is a first stab at creating a universally applicable list of good cost cutting ideas:
1. Reduce the size of HR and bring most of the hiring procedures inside business units. Let outgoing good people choose replacements and failing that let colleagues do it.
Every person they introduce will save an agency fee, the communications loop is cut to a fraction saving wasted time and effort and the new person will fit the job perfectly and blend in well.
2. Offer bonuses to all staff and ex staff to help you fill vacancies, not only will you get better people you will save a fortune in agency fees.
3. Get rid of the call centre and make each account manager responsible for maintaining the relationship with customers, if not directly then directly supervised. Task them to up sell and cross sell at every opportunity and to discover product opportunities and to get on first name terms. Not only will your turn a liability into an asset through more sales, you will strengthen customer retention and be better informed about new product opportunities. Every time you solve a problem for your customer, even if your product created it, you are strengthening the brand and deepening the relationship, provided you handle it well.
4. Share your marketing costs through joint campaigns. Partner with non competitive and complimentary businesses in your industry to share the cost of your mailings and other marketing initiatives. As well as sharing the cost of the campaign, you may also gain access to their database.
5. Stop posting letters and use email for everything. It sounds simple, but the mail vans are still delivering sacks full of messages days later at substantial expense when they could have been delivered instantly and for free.
6. Clamp down on meetings. By this I don’t mean stop them or give them a stigma, they are vital. Make sure they are used correctly and only when needed. Make sure there is an agenda and minutes and they are chaired. Consider training or coaching prople or even having a meetings baron who chairs all the important ones and supervises the rest.
Make sure that people who work together sit together.
7. Make sure everyone can type with more than two fingers and has been trained in advanced usage of the basic productivity software packages to get the best out of them. Like email, it sounds like a no-brainer, but the world is full of people who have struggled for years at 50% capacity all for the want of half a day in the classroom.
8. Install VOIP and use it. If you want to try it out first, you can put Skype on every pc and cut out all costs attached to internal voice communications, this costs nothing, just an email explaining to the staff how to download and use it.
A well chosen VOIP system can also dramatically reduce all of your messaging costs for a moderate initial investment. This is a must have, just like email.
9. Negotiate tighter costs on your big purchases, if your market shrinks, your suppliers will shrink too. Give them a chance to secure your business and gain some extra discounts from them.
10. Combat wage demands by making the staff happier at work so they don’t want to consider leaving. Encourage the people who are gifted in this way to organise sport and recreation groups. Provide child care for pre-school children and after school care to keep young mums at their desks and happy. Organise bulk buying clubs and help your employees to reduce their costs by buying the regular stuff at wholesale prices.
11. Encourage all your people to work from home at least one day a week, this will reduce their motoring costs by 20% and hence their cost of living by as much as 5%. It will also motivate them and help to retain them.
12. Train your managers to show appreciation regularly, Ideally do it by example. This can substantially mitigate pay demands.
13. When you need new software consider the open source option first. With the right advice you can discover a great deal of very high quality software with no licensing costs and low initial costs and support costs.
15. When you make changes, don’t just assume they will work, get away from your desk and make sure they are working.