What Not to Cut
In a difficult economy, it simply makes sense to look for areas in which you can efficiently cut costs. However, some cost cutting may lead to the creation of bigger problems than it solves. As far as intelligent trimming goes, Virgin Money USA CEO Asheesh Advani puts it this way: “The natural thing for business owners to ask is, ‘Do you cut marketing, overhead or staff?’ I think the right answer is to do a little bit of all three, but to be very careful on cutting what actually protects you on the downside.” In essence, cost savings should never come at the expense of the ability to execute on your long-term vision. As you make cuts in the following areas, consider these points:
- Human resources—If you do reduce your staff, keep communication open. If you acknowledge the changes, the remainder of your workforce will likely be more engaged, rather than panic and spend their time looking for new employment. If you reduce salary and benefits, let employees know how the decisions were reached.
- Technology—Maintaining customer data and infrastructure come first. For example, don’t hinder overall productivity by moving from a T1 line to DSL. Technology is also a great area in which to look for ways to save energy. Examine any maintenance or software agreements to see where you can renegotiate better fees.
- Marketing—Cutting marketing means cutting leads, which leads to less income.In fact, marketing in tough times offers an excellent opportunity: If your competition is cutting marketing and prices, maintaining or even increasing your marketing efforts can stimulate demand for your products and services, as your name is the one customers and prospects see. The most important thing is to think past the immediate pain and position for the post recession period, according to Ann Handley, Chief Content Officer at MarketingProfs. “The economy will go up and down, but now is a good time to be an industry leader, just like it is in every kind of environment,” she asserts.
Sources: “Recession Cost-Cutting No-Nos,” Entrepreneur; “Cost Cutting Gone Wrong,” Fast Company