Start with the largest costs, separate what creates value the customer feels from what does not, then cut waste, duplication and purchase prices. Track quality indicators such as complaints and returns while you cut, so you know at once if quality is affected.
Step by step
- 1
Rank costs from largest down
Put the last 12 months of expenses in a table and sort them from largest to smallest, because costs are usually concentrated in a few items.
- 2
Separate what the customer sees
What the customer feels in the product and service is only touched after careful study, while waste, duplication and unnecessary procedures are the first things to cut.
- 3
Negotiate with suppliers
Consolidate your purchases with fewer suppliers in larger volumes, request competing quotes every year, and negotiate payment terms, not just price.
- 4
Get rid of waste
Stock that spoils or becomes obsolete, work redone because of mistakes, returns, and subscriptions and software nobody uses.
- 5
Automate repetitive tasks
Manual data entry, invoicing and monthly reports take up hours, and a system can do them more accurately.
- 6
Watch quality while you cut
Set quality indicators such as complaints, returns and delivery time, and stop any cut that moves one of them the wrong way.
Cutting every department by the same percentage looks fair, but it cuts marketing and training, which build future revenue, and leaves the real waste untouched.
- how to cut business expenses
- cost reduction without affecting quality