Surviving the pandemic with cost reduction measures
strategies of cost minimization and are bearing the fruits. On the other hand, some companies are still considering multiple options to reduce costs so that it does not influence the business’ survival. Business leaders are struggling with cost reduction ideas since such a strategy must reduce the risks and give a strong ground of existence until the pandemic subsides.
Although cost minimization is not always the best strategy for a business; however, in these rough times, it is the most logical step to take forward. While some have contemplated the existing contracts, some are reviewing the investment decisions, some have stopped hiring or laid-off employees, and some have started restructuring their cost models. Different businesses may have different actions depending on their industry, growth stage, and other factors; however, the goal is the same: cost reduction to thrive in this crisis.
Small business owners and large corporations are looking for ways to work their way out through this crisis and the best solution for everyone in such trying times is cost reduction. However, a concrete and robust plan is required for cost minimization since sudden, directionless steps will take a toll on their subsistence.
Below, we discuss how businesses can reduce business expenses:
Adopt lean operations for the time being for cost reduction
Business leaders must focus on cost reduction through cutting or reducing the spending on non-essential operations. If the function is essential for the business to run smoothly, it must be retained, while if the operations are possible without that specific function, it must be eliminated. Overall, businesses must adopt a leaner way of operating to reduce costs.
Most of the businesses have adopted the ‘work from home’ model. This is a great way to give up their rental business spaces or renegotiate the pricing to reduce expenses. There are other office furniture and equipment that might be leased for use but not currently used.
Businesses have the option of cost reduction by returning such equipment or renegotiating their pricing. Businesses can also cancel the infrastructure improvement projects or renegotiate the new terms with contractors to minimize expenses. Businesses are also saving on the lights, air conditioning, and other resources used in the office when operations are not in full swing.
Many types of software are used in the operations, for which multiple subscriptions are taken but are not in use. These subscriptions can be done away with, or cheaper substitutes can be subscribed to reduce costs.
Furthermore, the acceptance of social distancing to avoid coronavirus has resulted in businesses’ acceptance of the ecosystem’s online presence. This is where businesses can lower the costs of traveling for business purposes. Unless and until the work is critical and mandatorily requires an individual’s presence, it is wise to work remotely from home, thereby reducing travel-related expenses and keeping employees safe. Such measures lead to cost minimization.
Cost minimization is possible through optimized marketing strategies
results.Furthermore, more people are reading social media posts while working from home to know about world news, business practices, and interests. This allows business leaders to create enriching, engaging, and efficacious content to keep the word going.
Another way of cost minimization is by using social media to become more active on social forums and online communities to share insights and tips based on their experience and knowledge. They can become influencers and thereby draw the business communities’ attention to their business or identify some business opportunities, solutions, or strategies along with other influencers.
Another way to lower costs is to partner with other businesses to promote both its products and services. However, it is crucial for business leaders to identify a strong partner, who is reputed, ethics-driven, and active in marketing strategies so that both the partners benefit from the deal. Such a partnership can also exist in other contexts such as sharing of workspace or internet or any other arrangement that can benefit both the companies by cost reduction in operations.
Businesses can also remain active and connected with other businesses, customers, and vendors in the ecosystem through online webinars and workshops. Such online activities can focus on new skill development classes, career-related courses, personality development sessions, or value-driven and self-improvement conferences and workshops.
They can have discussions with existing customers and potential customers on their expectations from the company and work on new features or benefits of the product or service. Overall, working on the social media presence and activity can keep the companies active in the customers’ minds and achieve the goal of cost minimization.
Achieving cost reduction through employee and payroll management
One of the company’s major costs is the payroll expenses – an essential cost, but a big one. Although employees are an essential asset base for the company, many companies have resorted to terminating employees to reduce costs. It is an unfortunate decision; however, the only cost minimization solution for some businesses to sail through the crisis.
offered to employees for their association with the company as cost minimization strategies. Benefits such as an annual bonus, gym memberships, birthday gifts, extra pay for overtime, and many others can be curtailed in the current times to lower expenses.
Another opportunity for cost reduction is freezing the hiring process. Other than the healthcare industry or online businesses, most of the industries are struggling for survival. Therefore, such struggling industries cannot bear the cost of a new workforce, which requires training and mentorship in the initial period to get used to the company work and culture. Instead, companies can encourage existing employees to take up new and more work until the crisis subsides. Such a cost reduction measure will benefit them in the future as well.
Defer some payments as a cost reduction measure
Many countries, governments, and financial institutions offered the option of postponing some payments such as loans, credit cards, rents, utilities, and others so that businesses can recover from the crisis in a better way through cost minimization. However, the onus lies with the businesses to read the terms and conditions before deferring the payments. It should not lead to greater costs later through higher interest rates or penalties. Businesses must discuss these options clearly with their banks, suppliers, or property owners.
Even reduced payment for a few months, which can be accumulated to higher payments in the next year, is also an option. Businesses can also discuss with their utility providers to defer payments, reduce monthly bills, or employ new payment plans so that they can focus on surviving the crisis first. Similar negotiations must be made with the suppliers, wholesalers, manufacturers, and distributors for better pricing or smaller contracts, leading to cost reduction for the company.
Businesses must focus on these short-term plans to reduce costs and come out of the crisis. However, they must monitor the implementation of these cost minimization plans to check for any adverse impact. If any adverse negative impact on the business is identified, minor tweaks or adjustments can lead to better results.
Besides these short-term cost reduction measures, it is also important for organizations to plan for the long-term. However, these plans can wait for the time being. In the current times, only the short-term cost minimization plans must be at the center of decision-making. They must adjust to the business world’s new normal with lesser demand, increased negotiation, better planning, and cost reduction in every aspect of the business.