Five ways to cut costs, whatever your business

1. ASK “WHY?”
If you think that something is wasteful, don’t accept that it is “just the way we do it here”. Bad habits can become engrained. In her book 100 Great Cost-Cutting Ideas, Anne Hawkins tells the story of a technology manufacturer which had been including needless technical information with all its products for 15 years, at massive cost. The best way to spot these sorts of inefficiencies is to bring in somebody from another part of the organisation to look at processes. They are more likely to ask the fundamental question: “Why do we do this?”

Make it a key part of people’s jobs to suggest money-saving improvements. Many people feel it isn’t their place to tell management that they are wasting money. Some come from cultures where it is disrespectful to criticise. These are corrosive ideas that you have to change. Reiterate to staff that you are all in business together – lower costs and higher profits mean more money for everybody. Explain that managers can’t make savings on their own, but that they need the input of the people on the ground, and communicate that you are a team.

It can be tempting to over-deliver on things like pretty packaging, but if customers aren’t using some parts of your service, then get rid of them. “Don’t do things that your customer doesn’t want and therefore isn’t paying for,” says Hawkins. Also, make sure there is a dialogue between those who talk to customers and those who design products. The key here is to go and look at the way the customers are using your product. This is the best way to work out what they do and don’t value.

Not all your cost-cutting tactics will have immediate effects, so make sure everybody knows that some of your changes will only see returns in the long-term. People get upset if they see big changes but few immediate bottom-line results, says Hawkins. Some of the changes will be “enablers”, which create opportunities. The cost-savings will only come about if the opportunities are seized. Make sure people understand that, and talk about timescales and follow-on actions from the start.

Every organisation has people who break the rules and appear to get results, but you need to check if these are results you want. They might make deals from personal contacts, but does chasing the invoices eat into your costs? Do they sell “solutions” that you can’t deliver? And brilliant new product ideas might be eye-catching, but does the market want them? Weight up the benefits mavericks bring against the costs they incur.