Luis Perez

How do you cut costs in your business?

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2 Answers

Neil Halls

Without knowing more about your business, this is almost impossible to answer specifically. However, a couple of generic things to look at:

  • What are your fixed verse variable costs? Fixed costs are the costs you incur everyday, regardless of how many goods you sell (i.e. an office lease). variable costs are cost you only incur when you produce or sell a good (i.e shipping, production costs, product insurance etc). All things being equal, a higher proportion of variable costs can be beneficial as you only incur the costs when you are selling goods and generating revenue. So think how you can switch your costs from fixed to variable. obviously the trick is then to reduce these variable costs

  • Depending on your type of business, how much inventory to you have? yes you need to to meet your customer needs, but having excess inventory is a huge business cost! try and minimise your inventory holdings, while still meeting your customer needs
  • Are you getting the best deal from suppliers? what is the relationship between your accounts payable and your accounts receivable? Are there lower cost suppliers or can you get better contract terms
  • Have a good look at your key financial ratios. these will tell you where to look in your business to help reduce costs. How do these compare with similar companies in your industry (if you can find this out?)

If this is a real issue for you, i would suggest you talk to someone who can help with this, as you will need to get a handle on this. While there are many companies who work in this space (yes we are one of them) make sure you get someone who can not only help you in the short term, but also teach you what to look for moving forward so you can continue to monitor your business as apposed to someone just trying to sell you something. We also offer free initial consultations if you would like to discuss more.

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Melanie Gray

Melanie Gray , Managing Owner at MyCL (My Computer Lab)

All the costs in my business are required.


I hope I don't ever try to cut costs and look more into increasing the costs of my services instead.

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